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STATE  SOCIALISM   IN   NEW  ZEALAND 


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STATE  SOCIALISM   IN 
NEW  ZEALAND 


BY 

JAMES   EDWAKD   LE   ROSSIGNOL 

PROFESSOR  OF  ECONOMICS  IN  THE  UNIVERSITY  OF  DENVER 
AND 

WILLIAM   DOWNIE   STEWART 

BAKRISTER-AT-LAW,  DUNEDIN,  NEW  ZEALAND 


NEW  YORK 

THOMAS    Y.  CROWELL   &    COMPANY 

PUBLISHERS 


Copyright,   1910, 
By  THOMAS  Y.  CROWELL  &  CO. 


Published  November,  1910. 


o 


(-1  lA, 
H4-L.5 


ob  TO 

HENRY   AUGUSTUS   BUCHTEL 
[        CHANCELLOR   OF   THE    UNIVERSITY   OF    DENVER 
SOMETIME    GOVERNOR    OF   COLORADO 


« 

"S 

-^ 


238582 


PREFACE 

In  giving  a  critical  account  of  some  phases  of  state 
activity  in  New  Zealand,  we  have  kept  in  mind  the 
point  of  view  of  the  foreign  observer  and  that  of  the 
citizen  of  the  Dominion  who  takes  part  in  the  discussion 
of  public  affairs.  From  the  former  point  of  view  it  is 
desirable  that  the  workings  of  the  various  social  experi- 
ments should  be  shown  as  they  are,  without  exaggeration 
or  concealment,  if  anything  is  to  be  learned  of  their  suc- 
cess or  failure,  or  any  knowledge  obtained  that  might  be 
used  in  the  cause  of  social  reform  in  other  countries. 

From  the  latter  point  of  view  nothing  is  more  impor- 
tant than  the  active  discussion  of  public  questions,  for  it 
is  by  this  means  that  the  conflict  of  interests  results 
in  compromise  and  legislation.  But  it  is  not  enough  to 
make  a  law  and  create  a  governmental  department, 
for  a  department  is  no  more  to  be  trusted  than  a  private 
corporation,  and  the  struggle  for  good  government  must 
go  on  all  the  time,  if  abuses  are  to  be  corrected  and  the 
liberties  of  the  people  to  be  preserved. 

It  is  well  that  members  of  Parliament  and  editors 
give  time  and  thought  to  public  questions;  but  manu- 
facturers and  merchants,  farmers  and  labourers,  and  all 
the  other  classes  must  do  the  same,  that  no  one  set  of 
interests  be  allowed  to  dominate  the  rest,  and  that  all 
may  work  together  for  the  common  weal.  In  New 
Zealand,  as  elsewhere,  most  of  the  people  are  busy  earn- 
ing a  living,  and  their  leisure  time  is  given  to  amusements 
of  one  kind  and  another,  but  there  is  an  increasing  num- 
ber of  good  citizens  who  study  the  questions  of  the  day, 


viii  PREFACE 

help  to  form  public  opinion  and  make  democratic  govern- 
ment possible.  Still  more  might  be  accomplished  if  it 
were  fully  realized  that  the  chief  work  of  the  schools  and 
colleges  is  the  training  of  citizens,  and  that  the  most  im- 
portant studies,  after  the  elementary  branches,  are  the 
new  humanities:  history,  politics,  economics,  and  soci- 
ology. 

The  chief  authorities  used  in  the  preparation  of  this 
book  have  been  government  reports,  parliamentary 
debates,  and  newspapers.  Of  the  government  reports, 
the  most  important  are  the  excellent  Year-Books,  con- 
taining an  enormous  amount  of  information,  and  giving  a 
fine  statistical  history  from  the  year  1892.  The  best 
discussions  of  public  questions  are  to  be  found  in  the 
Parliamentary  Debates,  and  the  newspapers  also  are  very 
good,  giving  reliable  news  and  excellent  editorial  articles. 
Of  secondary  authorities,  by  far  the  best  are  the  admir- 
able works  of  Mr.  Reeves.  The  works  of  Lloyd  and  Par- 
sons contain  much  information  and  interesting  comment. 
The  recent  book  by  Mr.  Scholefield  is  the  best  narrative 
of  the  industrial  development  of  New  Zealand  that  has 
yet  been  published.  There  is  a  conspicuous  lack  of 
monographs  on  special  topics,  although  there  is  a  vast, 
undeveloped  field  of  research  for  University  students 
and  other  investigators.  The  subject  of  industrial  arbi- 
tration, however,  has  been  carefully  studied,  and  the 
works  of  Pigou,  Gilman,  Knoop,  Clark,  Broadhead,  and 
Aves  are  especially  valuable. 

We  desire  to  thank  all  those  who  have  helped  us  in  the 
preparation  of  this  book,  especially  the  Hon.  Sir  Robert 
Stout,  the  Hon.  George  Fowlds,  the  Hon.  J.  A.  Millar, 
Consul-General  William  A.  Prickitt,  Professor  Ernest 
Rutherford,  Professor  Frederick  Douglas  Brown,  Mr. 
J.  P.  Grossman,  Mr.  Samuel  Vaile,  Mr.  John  MacGregor, 


PREFACE  ix 

Mr.  Edward  Tregear,  Mr.  E.  J.  von  Dadelszen,  and  Mrs. 
Hastings  Bridge.  Particular  thanks  are  due  to  Professor 
James  Hight,  of  Canterbury  College,  who  has  read 
several  of  the  chapters  in  manuscript  and  has  made  a 
number  of  valuable  suggestions. 

J.  E.  LE  ROSSIGNOL. 

W.  D.  STEWART. 


CONTENTS 

CHAPTER  PAGE 

I.  The  Functions  of  Government        ....  1 

II.  Land  Tenure 20 

III.  Land   Monopoly 34 

IV.  Roads  and  Railways 52 

V.  Railway  Finance 68 

VI.  The  Public  Debt 94 

VII.  The  Land  and  Income  Tax 117 

VIII.  Local  Taxation  of  Land 138 

IX.  State  Life  Insurance 153 

X.  State  Fire  Insurance 167 

XI.  Old  Age  Pensions      o 179 

XII.  The  Public  Service   .         .        ...         .         .         .  197 

Xni.  The  Arbitration  Act 216 

XIV.  Compulsory  Arbitration    in    Theory  and  Practice  238 

XV.  Strikes 250 

XVI.  Wages  and  Cost  of  Living 269 

XVII.  General  Survey  and  Estimate  of  Results     .         .  284 

Index 307 


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STATE    SOCIALISM    IN 
NEW    ZEALAND 

CHAPTER   I 
THE   FUNCTIONS  OF  GOVERNMENT 

About  the  middle  of  the  nineteenth  century,  in  the 

heyday  of  the  Manchester  School,  when  political  economy 

was  a  science  and  free  trade  a  gospel, 

it  was  common  for  writers  on  political    The  Policeman 

questions  to  propound  theories  of  gov-    Theory 

ernmental  functions,  to  assign  limits  to 

the   sphere   of    governmental    activity,    to   say   to    the 

State:     "  Hitherto  shalt  thou  come,  but  no  further." 

Buckle,  writing  in  1858,  said: 

"  To  maintain  order,  to  prevent  the  strong  from  oppressing  the 
weak,  and  to  adopt  certain  precautions  respecting  the  public  health 
are  the  only  services  which  any  government  can  render  to  the 
interests  of  civilization."  ("  History  of  Civilization  in  England," 
vol.  I,  ch.  5.) 

To  a  New  Zealander  of  the  present  generation  the 
words  of  Buckle  sound  like  a  voice  from  the  tomb,  and 
even  the  most  individualistic  American  must  be  inclined 
to  wonder  why  the  State,  like  a  policeman  on  his  beat, 
should  be  confined  to  this  narrow  round  of  duties.  Now- 
adays, the  student  of  social  evolution  is  less  dogmatic 
in  his  tone  and  less  inclined  to  indulge  in  sweeping 
generalizations.  He  is  well  satisfied  if  he  can  in  a  measure 
account  for  the  appearance  of  social  phenomena,  describe 
and  analyze  their  salient  features,  and  arrive  at  some 

I 


2      STATE  SOCIALISM   IN  NEW  ZEALAND 

conclusions,  more  or  less  dubious,  as  to  their  apparent 
effects. 

It  is  not  easy  to  explain  the  causes  which  brought 
about  the  multifarious  activities  of  the  New  Zealand 

Government.  The  settlers  were  chiefly 
Origin  of  Stat  eEnglish,  Scotch  and  Irish,  like  those 
Activities  of  British  America  in  the  early  days,  and 

at  the  present  time  the  canny  Scot  of 
Montreal  and  Pittsburg  feels  perfectly  at  home  in  Dune- 
din,  the  Canadian  of  Halifax  and  Toronto  finds  congenial 
friends  in  Auckland  and  Christchurch,  and  the  American 
of  New  York  can  talk  business  and  politics  on  an  equal 
footing  with  the  citizen  of  Wellington,  even  though 
they  may  not  see  eye  to  eye  on  all  political  and  indus- 
trial questions.  Since  there  is  no  essential  difference 
between  the  New  Zealander,  on  the  one  hand,  and  the 
Anglo-Saxon  of  the  United  States  or  Canada,  on  the 
other,  the  difference  in  regard  to  governmental  func- 
tions must  be  due  to  differences  in  environment  rather 
than  in  the  character  of  the  people. 

Perhaps  the  early  settlers,  many  of  whom  were 
brought  out  by  the  New  Zealand  Company  and  other 
associations,  from  1840  onwards,  had  a  sense  of  depend- 
ence which  made  them  look  to  the  Company,  and,  after- 
wards, to  the  State,  to  do  things  for  them  which  the 
American  settlers,  unwilling  to  be  taxed  and  unable  to 
borrow,  had  to  do  for  themselves.  (Clark,  "  The  Labour 
Movement  in  Australasia,"   pp.  34-39.) 

And  yet  the  settlers  were,  as  a  rule,  enterprising  and 
self-reliant  people,  the  provinces  were  small  and  governed 
by  the  leading  men,  and  the  work  of  the  provincial 
councils  was  the  work  of  the  settlers  themselves,  doing 
by  means  of  associated  activity  what  could  not  be  done 
so  well  by  individual  effort. 


THE  FUNCTIONS  OF  GOVERNMENT         3 

Indeed,  for  a  number  of  years  the  provinces  did  not 
differ  much  from  other  colonies  in  regard  to  governmen- 
tal enterprise.  They  administered  the 
Crown  lands,  built  roads,  maintained  Crown  Lands 
schools,  had  their  own  police,  and, 
although  subject  to  the  authority  of  the  General 
Assembly,  they  carried  on  governments  quite  similar 
to  those  of  the  states  of  the  Union  or  the  provinces  of 
Canada.  The  essential  feature  of  the  situation  was 
that  the  provinces  held  and  administered  the  Crown 
lands,  and,  like  other  landlords,  were  expected  to  make 
roads  and  otherwise  improve  their  estates  (Reeves, 
"  State  Experiments  in  Australasia  and  New  Zealand," 
vol.  I,  p.  62).  The  settlers  expected  a  good  deal  of  such 
improvement,  since  the  land  was  not  given  away,  but 
sold  at  prices  ranging  from  5,?.  ($1.25)  an  acre  in  Auckland 
to  £2  ($10)  an  acre  in  Canterbury. 

From  the  making  of  roads  the   provinces   naturally 
passed  to  the  building  of  railways.     Railways,  as  well 
as  roads,  were  needed  for  the  develop- 
ment of  the  country,  and  yet  they  were        Roads  and 
not  promising  forms  of  investment  for        Railways 
private    capital.      Colonial    capital    was 
profitably  employed  in  the  exploitation  of  land  and  the 
commerce  in  wool,  and  British  syndicates  could  not  have 
been  induced  to  build  railways  without  large  grants  of 
land,  which  the  people  were  unwilling  to  give.    Only  one 
course  remained, —  the  provinces  must  borrow    money 
and  build  railways  themselves,  and  this  they  did.     The 
first  railway  was  begun  by  the  Province  of  Canterbury 
in  the  year  i860,  and  in  1876,  when  the  provinces  were 
abolished,  there  were  about  70  miles  of  open  line  to  be 
taken  over  by  the  general  Government. 

The  beginnings,  then,  of  state  enterprise  were  closely 


4      STATE  SOCIALISM   IN  NEW  ZEALAND 

connected  with  governmental  ownership  of  land  and 
the  building  of  roads  and  railways.  The  United  States, 
on  the  other  hand,  took  another  line  of  develop- 
ment. Private  capitalists  were  eager  to  establish  rail- 
ways in  the  relatively  populous  Eastern  states,  and 
when  it  was  proposed  to  build  railways  in  the  West 
there  was  no  serious  objection  to  the  chartering  of  private 
companies  assisted  by  large  grants  of  public  land.  A  simi- 
lar development  has  taken  place  in  Canada,  where  most 
of  the  railways  are  owned  by  private  companies  and  where 
the  Government's  experience  with  the  Intercolonial 
Railway  does  not  encourage  the  trying  of  further  experi- 
ments in  governmental  ownership. 

The  provinces  could  not  have  gone  far  in  the  exten- 
sion of  governmental  functions  without  coming  into  con- 
flict with  the  general  Government,  in 
The  Constitu-  which  rested  the  supreme  power  within 
tion  Act  the   Colony,   but   the    general    Govern- 

ment itself  was  under  no  such  limita- 
tions. The  Constitution  Act  of  1852  (15  and  16  Vict., 
cap.  72)  granted  such  large  powers  to  the  General 
Assembly  that  New  Zealand  became  to  all  intents  and 
purposes  an  independent  republic,  with  power  to  regu- 
late practically  all  its  internal  affairs  and  even  to  repeal 
or  amend  the  Constitution  Act  itself,  with  the  exception 
of  certain  specified  provisions.  (Constitution  Act 
Amendment,  20  and  21  Vict.,  cap.  53.) 

In  the  United  States,  both  state  and  federal  laws 

are  frequently  declared  unconstitutional  because   they 

violate  some  provision  of  state  or  federal 

„  .  .  ,  constitutions, —  they  involve  class  legis- 
Constitutional  .  •   1  r        t  r 

Limitations  lation,  they  violate  freedom  of  contract, 

they  interfere  with  interstate  commerce, 

they  take  private  property  without  due  process  of  law, — 


THE  FUxNCTIONS  OF  GOVERNMENT        5 

in  one  way  or  another  they  are  null  and  void,  because 
of  the  existence  of  constitutions  in  which  are  intrenched 
the  individualistic  principles  of  the  eighteenth  century. 
But  the  legislators  of  New  Zealand  are  not  troubled  by 
obstacles  of  this  sort.  Provided  that  the  Acts  of  the 
General  Assembly  are  not  "  repugnant  to  the  law  of 
England,"  they  are  perfectly  legal.  The  New  Zealand 
Parliament,  like  that  of  England,  can  do  practically  any- 
thing it  pleases,  for  the  will  of  the  people  is  not  ob- 
structed by  constitutional  checks  and  safeguards  pre- 
scribed by  the  prejudice  and  timidity  of  a  previous 
generation.  In  this  respect  New  Zealand  is  far  more 
democratic  and  less  conservative  than  the  United  States. 

But  New  Zealand  did  not  go  very  far  in  the  direction 
of  state  socialism  before  the  political  revolution  of  1890. 
Before  that  time  the  Government  was 
largely  controlled  by  the  squatters  and  Early  State 

other  well-to-do  people,  and  the  various  Activities 

governmental  undertakings  were  de- 
signed chiefly  for  their  benefit  and  not  primarily  for  the 
good  of  the  poorer  classes.  The  establishment  of  the 
Postal  Savings  Bank  in  1865  is  perhaps  an  exception  to 
this  rule;  also  the  creation  of  Village  Settlements  for  the 
benefit  of  immigrants,  a  charitable  undertaking,  first 
begun  in  Canterbury  in  1874  by  the  Hon.  William  RoUes- 
ton,  and  afterwards  taken  up  by  the  general  Government 
in  1886.    (New  Zealand  Official  Year-Book,  1894,  p.  205.) 

The  first  electric  telegraphs  were  begun  by  the 
provinces,  but  the  general  Government  entered  the  field 
in  1865  and  afterwards  took  over  the  provincial  lines. 
This  led  to  the  establishment  of  telephone  systems  by 
the  Government  in  1884.  At  the  instance  of  Vogel,  the 
Government  passed  a  law  in  1869  establishing  the  State 
Life    Insurance    Office.      In    1872    the    Public    Trust 


6      STATE  SOCIALISM   IN  NEW  ZEALAND 

Office  Act  was  passed,  also  through  the  influence  of 
Vogel,  providing  for  the  creation  of  a  PubHc  Trustee  to 
administer  estates.  In  1870,  ParHament  passed  an  Act 
providing  for  the  estabHshment  of  the  New  Zealand 
University,  and  in  1877  the  Education  Act  was  passed, 
providing  for  the  free  and  compulsory  education  of 
children. 

In  1870,  Vogel,  then  colonial  treasurer  in  the  Fox 
Cabinet,  brought  forward  his  celebrated  public  works  and 
immigration    policy,    which    Parliament 
Vogel's  Public      endorsed  in  an  Act  providing  for  the  bor- 
Works  and  Im-  •  r      „  7»  x 

migration  Policy  ^owmg     of     £10,000,000      ($50,000,000) 

within  the  next  ten  years,  for  the  con- 
struction of  railways,  telegraph  lines,  water  races  for  the 
gold  fields,  roads,  and  other  public  works,  and  for  the 
encouragement  of  immigration.  In  fact,  twice  the  pro- 
posed amount  was  borrowed  and  spent  within  the  next 
ten  years  and  a  tremendous  impetus  was  given  to 
governmental  enterprise,  the  effects  of  which  have  been 
felt  until  the  present  day. 

Vogel  had  great  faith  in  the  future  of  New  Zealand 
and  still  greater  faith  in  the  power  of    governmental 
credit.     He  had   established   the  State 
State  Credit  Life  Office  on  the  basis  of  the  Govern- 

ment's credit;  a  little  later  he  was  to 
found  the  Public  Trust  Office  on  the  same  basis; 
and  now  he  proposed  to  borrow  enormous  sums 
for  the  development  of  the  country,  although  the 
public  debt  was  already  more  than  the  Colony  could 
easily  bear.  But,  as  many  a  business  man  on  the  point 
of  bankruptcy  has  been  saved  by  a  timely  extension  of 
credit,  so  the  Government  borrowed,  private  citizens 
borrowed,  and  the  Colony  enjoyed  for  eight  or  nine 
years  a  period  of  development,  inflation  and  apparent 


THE  FUNCTIONS  OF  GOVERNMENT        7 

prosperity,  living  on  borrowed  money.  Then,  in  1879, 
came  a  terrible  depression,  from  which  New  Zealand  did 
not  fully  recover  for  more  than  sixteen  years. 

The  policy  of  Vogel  greatly  strengthened  the  power 
of  the  general  Government,  particularly  when,  in    1876, 
he   had    the    provinces  abolished,   took 
over  their  lands  and  railways,  and  left      Abolition  of 
the  general   Government  supreme,  with      the  Provinces 
a    large    civil    service,    a    great    annual 
expenditure   from    loans   and   taxes,  and  an  enormous 
public  debt.    The  Government  had  become  the  dominant 
financial  power  in  the  Colony.    Still,  with  the  exception 
of  the  work  of  the  State  Life  Assurance  Office  and  the 
Public  Trust  Office,  the  Government  was  doing  practi- 
cally nothing  more  than  was  being  done  by  New  South 
Wales,  Victoria  and  other  Australian  colonies,  and  did 
not  go  much  ahead  of  them  until  the  new  democracy  came 
into  power  after  the  election  of  1890. 

The  political  revolution  of  1890  can  be  traced,  with  a 
considerable   degree   of   certainty,    to   the   methods   of 
acquiring  and  holding  .land  which  had 
obtained  since  the  time  of  the  Wakefield      Theories  of 
colonies.      Edward    Gibbon    Wakefield,      Wakefield 
the  founder  of  the  New  Zealand  Com- 
pany, held  peculiar  views  as  to  the  disposal  of  colonial 
lands.     He  thought  it  desirable  to  reproduce  in  New 
Zealand  a  fully  developed  society,  with  well-to-do  people 
owning  land  and  a  sufficient  supply  of  labour  to  do  the 
developmental  work  of  a  new  settlement.    To  that  end 
he  thought  that  land  should  be  sold  at  a  "  sufficient 
price,"  and  that  poor  but  carefully  selected  labourers 
should  be  given  free  passage  to  the  Colony,  where,  for  a 
time,  they  would  be  willing  to  work  for  others,  since  they 
could  not  get  free  land  from  the  Company.    Under  this 


8       STATE  SOCIALISM  IN  NEW  ZEALAND 

system,  capitalists  would  buy  land,  since  they  would  be 
assured  of  a  good  supply  of  labour  for  the  development  of 
it.  The  money  received  from  the  sale  of  lands  was  to  be 
spent  on  roads  and  other  public  works  and  on  bringing 
out  a  further  supply  of  labour.  (Reeves,  "  State  Experi- 
ments," vol.  I,  pp.  200-218;  Scholefield,  "  New  Zealand 
in  Evolution,"  pp.  172-176.) 

Perhaps,  if  Wakefield's  whole  scheme  had  been  put 
into  operation,  and  if  there  had  been  a  sufficient  supply  of 
land,  and  if  a  few  wealthy  people  had 
Landless  not  been  allowed  to  acquire  large  blocks 

Labourers  by  purchase  and  lease,  and  if  the  Colony 

had  been  an  agricultural  rather  than  a 
pastoral  country,  the  assisted  labourers  might  have 
acquired  land  quickly  instead  of  remaining  labourers  for 
years,  congregating  in  the  towns,  especially  during  the 
winter  months,  discussing  their  grievances  and  clamoring 
for  political  reform.  But  the  land  was  not  only  sold  but 
leased  in  enormous  tracts,  and  the  new-comers,  finding 
it  more  and  more  difficult  to  get  land,  were  much  dis- 
satisfied and  looked  to  the  Government  to  redress  their 
grievances. 

The  immigration  and  public  works  policy  of  Vogel, 
while  it  provided  employment  at  high  wages  for  a  time, 
in  the  end  increased  the  trouble,  for  the  prices  of  land 
improved  by  the  roads  and  railways  increased  so  much 
as  to  be  quite  out  of  the  reach  of  poor  men,  while  people 
who  had  a  little  capital  were  tempted  to  buy  too  much 
land,  chiefly  with  borrowed  money,  and  had  to  give  it  up 
to  the  mortgagee  when  the  time  of  inflation  came  to  an 
end.  Then  the  assisted  immigrants,  many  of  whom  had 
been  employed  in  building  roads  and  railways,  were 
thrown  out  of  work,  and  either  left  the  country  or 
remained  to  curse  the  landowners  and  importune  the 
Government. 


THE  FUNCTIONS  OF  GOVERNMENT        9 

The  statistics  of  immigration  and  emigration  during 
these  years  throw  much  Hght  upon  the  situation.  In  the 
year  1874,  43,965  persons  arrived  in  the  Colony,  including 
36,400  irom  the  United  Kingdom,  of  whom  31,774  were 
assisted  immigrants;  in  the  year  1881  there  were  only 
9,688  arrivals,  of  whom  only  103  were  assisted;  while 
from  1885  to  1 89 1  there  was  an  excess  of  emigrants  over 
immigrants  amounting  to  19,938  (Year-Book,  1894,  pp. 
71-76). 

If  the  whole  of  Vogel's  policy  had  been  accepted  by 
Parliament,    the   amount    borrowed    for    public    works 
would   have  been  less,  and  more  land 
would  have  been  available  for  settlement,         Foresight  of 
for  he  proposed  to  defray  a  large  part         Vogel 
of  the  cost  of  the  railways  by  the  sale  or 
lease  of  six  million  acres  of  public  land,  much  of  which 
could  have  been  taken  up  by  relatively  poor  men.    But 
the  landowners  defeated  this  part  of  his  scheme  while 
accepting  the  part  involving  enormous  borrowing  for 
railways  and  other  public  works  which  should  add  to  the 
value  of  their  lands  without  providing  permanent  occu- 
pations for  the  surplus  population. 

The  long  years  of  depression  which  followed  the 
bursting  of  the  boom  were  the  worst  that  New  Zealand 
has   ever   seen.      Mr.    Scholefield   says: 

"All     the     glory    of    the      seventies     had 
passed   away.      New    Zealand   was   in    a    state  Depression 

of  the  utmost  depression.  Legislation  was 
quite  powerless  to  remedy  evils  which  were  economic  and  not  merely 
political.  Many  colonies  have  had  similar  crises  to  face;  but  in  New 
Zealand  a  position  which  would  naturally  have  arisen  at  a  certain 
stage  of  the  Colony's  development  had  been  aggravated  incalculably 
by  the  reckless  and  extravagant  importation  of  certain  classes  of 
immigrants  to  whom  the  necessary  avenues  of  occupation  were 
closed.  Thousands  of  disappointed  men,  efficient,  industrious,  and 
temperate,  left  the  colony  in  despair.  Of  those  who  remained  many 
had  emigrated  from  the  Old  World  a  few  years  earlier,  full  of  hope 
and  enthusiasm.  They  were  now  inconsolable  agitators.  A  revolution 
was  at  hand."     (Scholefield,  "  New  Zealand  in  Evolution,"  p.  169.) 


lo    STATE  SOCIALISM   IN  NEW  ZEALAND 

And  yet  it  was  during  the  dreary  depression  of  the 
eighties  that  an  invention  was  made  which  revolutionized 
the  sheep-raising  industry  and  laid  the 
Frozen  foundations  for  the  extraordinary  pros- 

Mutton  perity  of  later  years.     This  was  the  im- 

provement of  the  process  of  refrigeration, 
at  first  applied  to  the  freezing  of  meat,  but  later  used  in 
the  shipping  of  dairy  produce  and  fruit.  The  first  at- 
tempts to  export  frozen  mutton  were  made  by  Australian 
shippers,  but  the  first  really  successful  shipment  was 
made  from  Port  Chalmers  in  1882  under  the  direction  of 
Mr.  Thomas  Brydone,  the  general  manager  of  the  New 
Zealand  and  Australian  Land  Company,  one  of  the  largest 
holders  of  land  in  New  Zealand.  In  this  case,  if  in  no 
other,  the  large  landholders  rendered  a  service  to  their 
country.  Of  this  epoch-making  event  Mr.  Scholefield 
says: 

"  The  meat  was  landed  in  perfect  condition  and  sold  for  6  1-2J. 
per  pound  —  a  price  which  has  not  since  been  reached.  The  '  pro- 
digious fact  '  was  there,  to  quote  The  Times,  that  fresh  meat  from 
the  antipodes  had  been  landed  in  London  in  perfectly  sound  and 
wholesome  condition.  And  prodigious  it  was  for  the  colonial  meat 
industry.  For  New  Zealand  it  utterly  revolutionized  both  agricul- 
ture and  grazing."  (Scholefield,  op.  cit.,  p.  129;  Year-Book,  1893, 
pp.  190-198.) 

The  importance  of  this  new  industry  can  hardly  be 
over-estimated.     Before  1882  it  was  impossible  to  ship 

mutton  to  the  European  markets  be- 
An  Industrial  cause  of  the  long  voyage  across  the 
Revolution  tropics,   and   there  was  no   market    for 

mutton     in     the    Southern    hemisphere 

beyond  the  slight  demand  for  local  needs. 

"  At  this  stage  the  whole  marketable  product  of  a  sheep  was  a 
few  fleeces  of  wool,  a  pelt,  and  a  boiled-down  carcase.  Except  in  the 
close  environs  of  a  town,  cattle  were  useless  except  for  the  skin  and 
the  horns.  Possibly  some  preserved  meat  brought  in  a  little  income, 
but  more  often  the  carcase  was  returned  to  the  land  from  the  animal 
fertiliser  works."     (Scholefield,  op.  cit.,  p.  121.) 


THE  FUNCTIONS  OF  GOVERNMENT       ii 

Thousands  of  sheep  were  sold  for  sixpence  a  head, 
and  many  more  were  merely  destroyed  by  the  farmers 
when  it  no  longer  paid  to  keep  them  on  pasture.  Simi- 
larly, butter  and  cheese  were  made  chiefly  for  the  local 
markets,  but  with  the  advent  of  the  refrigerator  the 
dairy  industry  rapidly  increased  in  importance  until  it 
took  third  place  in  the  list  of  exports. 

But  it  must  not  be  thought  that  frozen  mutton  imme- 
diately took  possession  of  the  British  markets.  There 
was  and  still  is  a  prejudice  against  frozen  meat  of  any 
kind,  although  connoisseurs  have  declared  that  New 
Zealand  frozen  mutton  is  equal  to  the  best  home-grown 
mutton.  The  shipment  of  1882  was  valued  at  .£19.339 
($95,000),  and  it  was  not  until  the  year  1890  that  the 
value  of  the  exports  of  frozen  meat  exceeded  £1,000,000 
($5,000,000) ,  and  the  exports  of  butter  and  cheese  did  not 
exceed  £1,000,000  until  the  year   1901. 

The  following  figures  show  the  values  of  the  exports 

of  wool,  frozen  meat  and  dairy  produce  for  the  years 

1882,  1892  and  1907:    (Year-Book,  1909,  p.  639). 

1882  1892  1907 

Wool .' £3,118,554  £4,313,307  £7,657,278 

Frozen    meat 19-339  I.033.377  3420,664 

Butter  and  cheese 62,218  318,204  2,277,700 

Total  exports £6,253,350  £9,365,868  £19,783,138 

Population  of  New  Zealand 

exclusive  of  Maoris .. .  517,707  650,433  929,484 

It  is  hard  to  say  what  New  Zealand  would  have 
been  without  refrigeration.  Certainly,  the  production  of 
wool  could  not  have  increased  as  it  has,  no  amount  of 
legislation  could  have  made  small  farming  profitable, 
and  in  all  probability  most  of  the  labour  legislation  would 
never  have  been  enacted.  Without  doubt,  refrigeration 
has  done  more  for  the  small  farmer  and  the  workingman 
than  all  the  legislation  of  the  past  twenty  years  put 
together. 


12     STATE  SOCIALISM   IN  NEW  ZEALAND 

The  only  serious  misgivings  as  to  the  continuance 
of  this  prosperity  arise  from  the  fact  that  New  Zealand 

has  no  monopoly  of  refrigeration.  Aus- 
Possibility  of  tralia  uses  the  same  process ;  also  Argen- 
Over-production  tina ;  and,   since   England  is  practically 

the  only  open  market,  it  is  possible  that 
there  may  be  an  over-production  of  wool  and  mutton, 
prices  may  fall,  and  another  period  of  hard  times  may  be 
in  store  for  New  Zealand  and  other  countries  whose  pros- 
perity depends  chiefly  upon  the  export  of  a  few  staple  pro- 
ducts. The  glut  in  the  British  market  for  frozen  mutton 
in  the  year  1909,  when  the  wholesale  price  in  London 
dropped  to  2  ii-i6d  (5  3-8c)  a  pound,  was  severely  felt 
in  New  Zealand,  and  would  have  had  the  most  serious 
consequences  if  it  had  continued  very  long  and  if  the 
prices  of  wool  had  not  been  well  maintained.  But 
wool,  mutton  and  dairy  produce  are  necessaries  of  life 
and  not  articles  of  luxury;  the  world's  population  is 
increasing;  it  seems  likely  that  new  markets  will  be 
opened,  and  that  there  will  be  a  steady,  if  not  increasing 
demand  for  all  that  New  Zealand,  Australia  and  South 
America  can  produce. 

The  full  effects  of  refrigeration  were  not  felt  until  well 
on  in  the  nineties.     Meanwhile,  hard  times  continued, 

and  resulted  in  the  victory  of  the  Liberal 

.Political  Revo-    Party  in   the  election  of   December  5, 

lution  of  1890      1890.     The  land  question  was  the  chief 

issue,  and  Ballance  and  his  friends 
rallied  to  the  Liberal  standard  all  those  who  wanted 
land  and  all  who  sympathized  with  them  and  were 
opposed  to  the  monopolistic  spirit  of  the  great  land- 
holders. 

This  prejudice  against  large  landholders  has  hardly 
existed  in  the  United  States  and  Canada,  where  land 


THE  FUNCTIONS   OF  GOVERNMENT       13 

has  been  used  more  for  agricultural  than  pastoral 
purposes,  where  small  holdings  have  been  the  rule,  and 
where  large  owners  have  usually  been 
willing  to  divide  their  estates  and  sell  at  Small  Holdings 
a  profit  to  small  farmers.  New  Zealand,  in  America  - 
on  the  other  hand,  is  still  predominantly 
a  pastoral  country;  large  estates  are  frequently  more 
profitabTe^per  acre  than  small  holdings;  and  wealthy 
people,  who  appear  to  have  the  English  idea  of  acquiring 
a  great  estate  and  founding  a  country  family,  often 
refuse  to  part  with  their  land  at  any  price  when  the 
interests  of  the  people  as  a  whole  demand  closer  settle- 
ment. In  1890,  there  was  an  extraordinary  concentra- 
tion in  the  holding  of  land  and  even  at  the  present  time  a 
large  part  of  the  land  is  held  by  a  very  few  people. 
Writing  of  the  condition  of  affairs  when  the  Liberal 
Government  came  into  power,  Mr.  Reeves  says: 

"  Not  half  the  66  million  acres  of  land  which  the  islands  contain 
were  then  settled  upon  even  in  the  sparsest  way.  Yet  585  persons 
or  companies  owned  between  10  and  1 1  million  acres;  684  companies 
or  persons  owned  or  occupied  real  estate  the  unimproved  value  of 
which  was  only  a  little  less  than  £22,000,000.  Two-thirds  of  i  per 
cent,  of  the  landowners  held  40  per  cent,  of  the  land  values.  Putting 
urban  land  on  one  side,  a  return  of  rural  holdings  of  more  than  five 
acres  in  extent  showed  that  one  eightieth  of  the  country  landholders 
held  two-fifths  (in  value)  of  the  land.  The  price  of  land  had  fallen 
in  1891;  some  of  the  large  owners  were  by  no  means  prosperous; 
but  pity  for  them  did  not  get  rid  of  the  necessity  for  challenging 
monopoly,  settling  the  soil,  and  peopling  the  country."  ("  Land 
Taxes  and  Rates  and  Valuation  of  Land  in  New  Zealand,"  a  memor- 
andum prepared  for  the  Chancellor  of  the  Exchequer,  1909;  Year- 
Book,  1892,  p.  94.) 

The  agitation  against  the  large  landholders  was  one 
of  the  two  chief  factors  which  brought  about  the  victory 
of  the  Liberal  Party;   the  other  was  the 
growing    power    of    organized     labour.       Labour  in 
The  labourers  of  the  towns  fully  agreed       Politics 
with  their  comrades  of  the  country  as  to 
the  desirability  of  breaking  up  the  great  estates  and 


14    STATE  SOCIALISM   IN   NEW  ZEALAND 

opening  the  land  to  closer  settlement;  but  they  had  also 
grievances  of  their  own.  Wages  had  fallen  since  1879; 
there  was  much  unemployment,  particularly  during  the 
winter  months;  and  in  the  larger  towns  conditions  of  em- 
ployment had  arisen  very  similar  to  the  sweating  system 
of  the  Old  Country.  The  Sweating  Commission,  report- 
ing in  May,  1890,  disagreed  as  to  the  existence  of  sweat- 
ing, but  it  was  generally  admitted  that  labour  conditions 
were  bad,  especially  in  regard  to  the  employment  of 
women  and  children  for  long  hours,  at  low  wages,  and  in 
overcrowded,  unsanitary  workshops.  Mr.  Scholefield 
says : 

"  The  evils  which  existed  at  that  time  were,  of  course,  primarily 
due  to  the  terrible  depression  under  which  the  Colony  had  laboured 
for  the  last  ten  years.  But  their  intensity  was  plainly  the  result 
of  the  absolute  lack  of  any  regulation."    (Scholefield,  op.  cit.,  p.  197.) 

The  Knights  of  Labour  and  other  organizations  were 
quite  active  during  the  later  eighties,  and  then,  in  1890, 
came  the  Maritime  Strike,  which  united 
The  Maritime  the  workingmen  and  prepared  them  for 
Strike  the  political  struggle  of  the  same  year. 

Another  thing  which  increased  the  polit- 
ical power  of  the  w^orkingmen  was  an  Act  passed  in 
1889  prohibiting  electors  from  voting  in  more  than  one 
electoral  district  at  any  election  for  the  House  of  Repre- 
sentatives. Previous  to  this,  people  owning  property  in 
several  districts  were  allowed  several  votes,  and  this 
gave  a  great  advantage  to  the  propertied  classes.  The 
election  of  1890  was  the  first  election  of  members 
of  the  House  on  the  one-man-one-vote  principle. 

The  labourers  were  unsuccessful  in  the  strike,  which 
came  to  an  end  early  in  November,  but  on  December  5 
tlie  Liberal  Party,  with  the  aid  of  the  Unions,  were  vic- 
torious at  the  polls.  It  is.  interesting  to  note  that  organ- 
ized labour  in  Australia,   after  being  defeated  in  the 


THE  FUNCTIONS  OF  GOVERNMENT       15 

Newcastle  strike  of  1909-10,  when  several  of  their  leaders 
were  condemned  to  prison,  won  a  still  greater  victory  in 
the  elections  of  April,  1910,  and  Mr.  Andrew  Fisher,  once 
a  poor  miner,  became  Prime  Minister  of  the  Common- 
wealth. Thus  the  Australian  Labour  Party,  remaining 
independent,  accomplished  in  a  more  thoroughgoing 
manner  what  the  New  Zealand  labourers  accomplished 
in  1890  through  an  alliance  with  the  Liberal  Party. 

The  Hon.  John  Ballance,  who  became  Premier  on 
January  24,  1891,  was  primarily  a  land  reformer,  as  was 
also  the  Hon.  John  McKenzie,  the  Min- 
ister of  Lands  in  the  new  Cabinet,  but  Labour 
the  Hon.  William  Pember  Reeves,  the  Legislation 
Minister  of  Labour,  had  at  heart  the 
welfare  of  the  working  class,  and  was  the  author  of  most 
of  the  labour  legislation  of  the  next  five  years.  Among 
these  Acts  the  most  important  were  the  following:  The 
Employers'  Liability  Act  Amendment  Act,  1891; 
The  Truck  Act,  1891;  The  Factories  Act,  1891;  The 
Coal  Mines  Act,  1891 ;  The  Contractors'  and  Workmen's 
Lien  Act,  1892;  The  Shops  and  Shop-assistants  Act, 
1892;  The  Workmen's  Wages  Act,  1893;  The  Shipping 
and  Seamen's  Act  Amendment  Act,  1894;  the  Indus- 
trial Conciliation  and  Arbitration  Act,  1894;  and  The 
Servants'  Registry  Office  Act,  1895.  Most  of  these  Acts 
have  been  amended  many  times,  and  constitute  a  formid- 
able body  of  laws  designed  for  the  protection  of  workers 
in  almost  every  field  of  industry.  ("  The  Labour  Laws 
of  New  Zealand,"  fourth  edition,  1905.) 

Since  Mr.  Reeves  left  the  Colony  in  1896  to  become 
Agent-General  of  New  Zealand  in  London,  the  only 
distinctive  Acts  that  have  been  passed  for  the  benefit  of 
labour  are  The  Old  Age  Pensions  Act,  1898;  The  Mid- 
wives  Act,  1904;  The  Workers'  Dwellings  Act,  1905; 
and  The  Government  Advances  to  Workers  Act,  1906. 


i6    STATE  SOCIALISM   IN  NEW  ZEALAND 

It  might  be  thought  that  labour  got  more  than  its 
share  of  the  benefits  of  the  Liberal  administration,  if  one 
did  not  consider  the  important  series 
Land  Reform  of  Acts  designed  to  break  up  the  great 
estates,  to  make  it  easy  for  poor  farmers 
to  purchase  land,  to  relieve  them  of  the  burden 
of  taxation,  and  to  lend  them  money  at  low  rates 
of  interest.  Of  these  Acts  the  chief  were:  The  Land  and 
Income  Assessment  Act,  1891 ;  The  Dairy  Industry  Act, 
1892;  The  Land  Act,  1892;  The  Land  for  Settlements 
Acts,  1892;  The  Government  Advances  to  Settlers  Act, 
1894;  and  the  Government  Valuation  of  Land  Act, 
1896.  These  Acts  have  been  amended  from  time  to 
time,  and  some  of  the  later  amendments,  like  The  Land 
Laws  Amendment  Act,  1907,  have  not  been  quite  so 
favourable  to  the  farmers  as  the  earlier  Acts. 

Apart  from  Acts  like  these,  which  were  frankly  de- 
signed for  the  benefit  of  the  labourers,  on  the  one  hand, 
and  the  small  farmers,  on  the  other, 
State  Trading  there  was  not  much  extension  of  govern- 
mental functions  before  the  year  1901. 
In  that  year  The  State  Coal  Mines  Act  was  passed, 
and  the  State  began  to  mine  and  sell  coal  in  com- 
petition with  private  companies.  The  Accident  Branch 
of  the  Government  Insurance  Department  was  opened 
in  1901,  and  two  years  later  the  State  Fire  Insur- 
ance Office  was  opened.  Besides  these,  a  number  of 
minor  State  enterprises  have  been  undertaken  from  time 
to  time,  such  as  the  purchase  of  the  patent  rights  of  the 
cyanide  process,  which  the  State  leases  to  miners  at  a 
reasonable  royalty;  the  placing  of  the  Auckland  oyster 
beds  under  Government  management;  the  establishment 
of  fish  hatcheries;  the  stocking  of  the  rivers  with  trout; 
and  the  establishment  resorts  for  tourists  and  invalids 
at  Rotorua,  Te  Aroa  and  Hanmer. 


THE  FUNCTIONS  OF  GOVERNMENT       17 

Not  only  does  the  State  do  all  these  things,  and  more, 
but  it  is  constantly  being  importuned  to  assume  new 
functions,  to  invade  new  fields  of  private  enterprise.  Mr. 
Scholefield  says: 

"  Scarcely  a  month  passes  without  some  convention  passing 
a  cheerful  resolution  demanding  that  the  Government  should  step 
in  and  operate  some  new  industry  for  the  benefit  of  the  public.  Now 
it  is  banking:  to-morrow  bakeries:  over  and  over  again  some  moder- 
ate reformers  have  called  upon  the  Government  to  become  the  con- 
trollers of  the  liquor  traffic:  once  upon  a  time  it  was  importuned 
to  become  a  wholesale  tobacco-seller:  more  than  once  to  purchase 
steamers  to  fight  the  supposed  monopoly  of  existing  lines."  (Schole- 
field, "  New  Zealand  in  Evolution,"  p.  258.) 

But,    notwithstanding    these   demands,    the    feeling 
seems  to  be  growing  that  the  Government  should  not 
move   too   rapidly   in   the  direction   of 
state  socialism.    The  laissez-faire  theory         Opportunist 
has  never  had  much  influence  in  New  Legislation 

Zealand,  nor  has  any  socialistic  doctrine 
had  much  to  do  with  the  increase  of  governmental 
functions.  The  people  of  New  Zealand  are  not  doc- 
trinaires, and  the  academic  question  as  to  the  proper 
spheres  of  governmental  and  individual  activity  is 
seldom  discussed.  The  State  has  taken  up  one  thing 
after  another  as  the  result  of  concrete  discussion  of  con- 
crete cases.  Usually,  if  not  invariably,  abuses  have 
been  thought  to  exist,  which  the  State  has  been  called 
upon  to  remedy :  the  great  landowners  have  stood  in  the 
way  of  closer  settlement:  wages  have  been  low  and  con- 
ditions of  labour  bad:  rates  of  interest,  insurance  pre- 
miums, prices  of  coal,  and  rents  of  dwellings  have  been 
thought  to  be  high :  the  oyster  beds  have  been  depleted 
by  private  exploitation:  taxation  has  fallen  too  heavily 
upon  the  poor:  for  one  cause  or  another  there  has  been 
complaint,  complaint  has  grown  into  agitation,  and 
agitation  into  legislation. 


i8    STATE  SOCIALISM   IN   NEW  ZEALAND 

If  there  is  any  prevalent  theory  as  to  the  scope  of 
governmental   activity,   it   is   a   form    of    paternalism, 

which  regards  the  State  as  the  parent  or 
Paternalism         guardian  of  the   people,  particularly  of 

the  poor  and  weak,  for  the  sake  of  se- 
curing the  greatest  good  to  the  greatest  number.  The 
Hon.  Dr.  Findlay,  who  is  both  scholar  and  statesman, 
recently  said: 

"  Thought  and  experience  have  shown  that  in  modern  nations 
the  system  of  natural  liberty  is  not  a  policy  of  true  progress;  that, 
on  the  contrary',  such  progress  can  be  attained  only  by  limiting 
greatly  individual  liberty  and  by  eliminating  the  struggle  for  a 
bare  existence  by  checking  and  removing  the  competition  and 
other  conditions  which  give  rise  to  it.  This  involves  provision  both 
for  the  ascent  of  capacity  and  the  descent  of  incapacity.  The  true 
policy  of  progress  in  modern  nations  is  not  the  mere  protection  by 
the  State  of  legal  rights,  but  provision  by  the  State  of  the  conditions 
which  are  essential  to  the  welfare  of  the  people.  This  means  the 
securing  for  all  who  need  it  some  measure  of  freedom  of  opportunity 
as  well  as  protection."  (Lecture  by  Dr.  Findlay  before  the  Philoso- 
phical Society  at  Palmerston  North,  April  2i,  1910.) 

And  yet,  all  careful  observers  recognize  the  fact  that 
much  of  the  legislation  of  recent  years  is  still  experi- 
mental in  its  character,  and  that  it  has 
or     nti-      ^^  ^^  stand  the  test  of  a  prolonged  in- 
cism  of  Social-      ,         .   ,     ,  .  -.j  , 

istic  Legislation  austnal  depression.  Not  only  must 
the  workings  of  past  legislation  be 
critically  examined,  but  every  new  proposal  to  increase 
the  functions  of  the  State  must  be  subjected  to  a  search- 
ing criticism,  and  it  must  be  clearly  shown  in  every  case 
that  the  benefits  to  be  secured  are  sufficient  to  outweigh 
the  evils  necessarily  connected  with  a  curtailment  of 
individual  liberty.  Dr.  Findlay  may  be  regarded  as 
expressing  the  general  attitude  of  the  Ward  Government 
when  he  says: 

"  While  the  functions  of  the  State  must  increase  in  area  and 
number  if  our  social  ideals  are  to  be  promoted,  evory  increase  should 
be  jealously  watched.  Excess  of  social  control  upon  the  individual 
life  is  as  pernicious  as  excessive  liberty."    {The  Evening  Post,  April 

22,  I9IO.) 


THE  FUNCTIONS  OF  GOVERNMENT       19 

While  the  social  legislation  of  the  past  twenty  years  is 
not  socialistic  in  the  sense  of  being  inspired  by  socialistic 
doctrine,  it  is  socialistic  in  that  it  has  been  brought  about 
by  a  political  uprising  of  the  middle  and  lower  classes 
against  the  rich.  The  liberty  of  landowners  and  other 
capitalists  has  been  restricted  in  many  ways;  the  Govern- 
ment has  made  efforts  to  equalize  the  distribution  of 
wealth ;  the  strong  have  been  compelled  to  bear  the  bur- 
dens of  the  weak;  and  some,  at  least,  of  the  property  of 
the  rich  has  been  taken  away  and  given  to  the  poor. 
The  political  evolution  has  been  along  the  line  of  social- 
istic prophecy,  anticipated  in  ancient  times  by  Aristotle, 
who  said:  "If  the  poor,  because  they  are  in  the 
majority,  may  divide  among  themselves  what  belongs 
to  the  rich,  is  not  this  unjust  ?  In  sooth,  by  heaven, 
it  will  have  been  judged  just  enough  by  the  multitude 
when  they  gain  the  supreme  power."  ("The  Politics," 
Book  III.  chap.  VI.) 


CHAPTER  II 

LAND  TENURE 

It  might  be  supposed  that  in  a  country  like  New 
Zealand,  so  recently  settled  and  so  democratic  in  its 
constitution,  the  evils  of  the  land 
orthTLanr^  problem  in  older  countries  would  have 
Ouestion  been    successfully    avoided.      Yet    the 

people  of  New  Zealand  have  been  trou- 
bled about  this  question  since  the  arrival  of  the  earliest 
settlers,  and  there  has  scarcely  been  a  year  since  respon- 
sible government  was  granted  in  which  Parliament  has 
not  passed  new  land  laws  or  amended  old  ones.  The 
Land  Act,  1892,  repealed  fifty-two  Acts  and  Ordinances, 
and  since  then  sixty-eight  amendments  of  more  or  less 
importance  have  been  passed. 

Two  main  aspects  of  the  land  question  have  from  time 
to  time  loomed  large  in  the  public  mind.  The  first  of 
these  is,  "  Should  the  State  sell  its  lands  or  merely  lease 
them?"  The  second  is,  "What  is  the  most  effective 
means  of  preventing  land  monopoly,  of  breaking  up  the 
large  estates?  "  At  various  times  one  or  other  of  these 
questions  has  engrossed  the  attention  of  Parliament  and 
the  people.  The  attempts  made  and  the  results  achieved 
form  one  of  the  most  interesting  object  lessons  New 
Zealand  has  yet  furnished  to  the  student  of  economics. 

The  advisability  of  the  State's  retaining  its  own  lands 

did  not  enter  seriously  into  politics  until  the  decade 

between     1870    and     1880.       Prior    to 

Early  Selling        that  the  legislature  and  the  provincial 

of  Land  governments  were  more  concerned  with 

getting  the  land  taken  up  and  settled 

20 


LAND  TENURE  21 

than  with  any  theoretical  views  of  land  tenure.  Edward 
Gibbon  Wakefield,  the  founder  of  New  Zealand,  laid 
down  the  principle  that  the  land  should  be  sold  at  a 
uniform  and  sufficient  price  and  the  proceeds  employed 
in  importing  labour  and  carrying  out  public  works.  His 
system  has  been  fiercely  attacked  as  an  attempt  to  repro- 
duce a  landed  aristocracy  in  New  Zealand,  and  has  been 
ably  defended  as  a  means  of  securing  settlers  of  a  good 
class,  checking  monopoly,  and  preserving  the  public 
estate.    (Reeves,  "  State  Experiments,"  Vol.  i.) 

The  details  of  the  early  disposal  of  the  public  lands 
are  extremely  involved,  owing  to  the  system  of  local 
government  which  prevailed.  There  were  six  provincial 
councils  —  and  later  eight  —  all  developing  their  settle- 
ments in  their  own  way.  But  they  all  sold  their  lands 
for  cash,  or  on  deferred  payments,  at  prices  varying 
from  55.  to  £2  an  acre,  with  the  double  object  in  view  of 
settling  the  land  and  securing  an  immediate  revenue  for 
roads  and  other  public  works.  When  the  provinces  were 
abolished,  in  1876,  the  Crown  lands  were  taken  over 
by  the  general  Government. 

In  1870  the  Colony  entered  on  a  large  system  of 
borrowing  for  public  works  and  immigration.     Two  re- 
sults   followed:     first,    the    large    loans 
rendered   it  unnecessary   for   the  State  Results  of  Public 
to  rely  on  land  sales  as  a  means  of  getting  Works  Policy 
funds    to    build    railways,    roads    and 
bridges;     secondly,    the    construction    of    these    public 
works  and  the  inflow  of  immigrants  rapidly  enhanced 
land  values.     The  freeholders  were  well  satisfied  with 
this  result,  but  a  few  thoughtful  men  began  to  question 
the  expediency  of  first  parting  with  the  public  estate 
and  then  enhancing  its  value  in  the  hands  of  private 
persons  by  spending  millions  in  public  works. 


22     STATE  SOCIALISM   IN  NEW  ZEALAND 

The  names  of  three  statesmen  are  closely  associated 
with  the  efforts  made  to  retain  the  public  lands,  or  part 
of  them,  for  the  State,  a  policy  advo- 
The  Perpetual  cated  by  Sir  Robert  Stout  in  the  House 
Lease  of   Representatives  as  far  back  as  1875. 

Rolleston,  who  became  Minister  for 
Lands  in  1879,  was  a  man  of  fine  culture,  liberal  views, 
and  rare  political  honesty.  In  1882  he  introduced  a 
land  bill  by  which  he  proposed  to  institute  a  system  of 
perpetual  leases  as  regarded  one  third  of  the  Crown 
lands.  The  rents  were  to  be  5  per  cent,  on  the 
unimproved  value  of  the  land,  with  revaluation  after 
thirty  years  and  later  revaluations  after  periods  of 
twenty-one  years,  and  were  to  be  applied  for  educa- 
tional and  other  purposes.  In  a  speech  which  is  still 
one  of  the  best  that  can  be  read  on  the  land  question, 
Rolleston  pointed  to  the  dangers  of  land  monopoly  and 
the  advantages  which  were  to  be  derived  from  large 
landed  endowments.  (Reeves,  "  State  Experiments," 
Vol.  I,  p.  242.) 

Had  Rolleston  succeeded  in  his  plans  the  whole  his- 
tory of  the  land  question  would  have  been  changed.  But 
the  Upper  House,  which  was  then  a  very  conservative 
body,  representing  chiefly  the  landholding  interests,  was 
strongly  in  favour  of  the  freehold  and  insisted]  on 
inserting  a  clause  giving  the  lessees  the  right  of  purchase 
at  the  prairie  value,  which  was  about  £1  an  acre,  as  soon 
as  they  had  fenced  the  land  and  cultivated  one-fifth  of  it. 
To  this  Rolleston  strongly  objected,  because,  as  he 
pointed  out,  the  perpetual  lease  would  then  be  merely 
a  duplication,  with  slight  changes,  of  the  deferred-pay- 
ment system  which  had  been  in  force  six  years.  He 
tried  repeatedly  to  cut  out  the  right  of  purchase,  but  his 
efforts  were  fruitless.     The  Upper  House  remained  ob- 


LAND  TENURE  23 

durate  and  defeated  his  object  both  in  the  bill  men- 
tioned and  in  a  similar  bill  introduced  the  next  year. 

The  perpetual  lease  immediately  became  very 
popular.  Up  to  December  31,  1892,  1,188,071  acres 
were  taken  up  under  this  system.  It  had 
the  effect  of  lessening  the  demand  for  Advantages  of 
land  on  deferred  payment,  since  the  this  System 
rental  was  only  5  per  cent,  on  the  value 
of  the  land,  and  the  lessees  had  all  the  security  and 
permanence  of  freehold  tenure,  without  requiring  to 
sink  any  capital  in  the  purchase  of  the  land  until  they 
found  it  convenient  to  do  so.  Also,  there  was  a  tempta- 
tion to  postpone  the  right  to  purchase,  since  money  was 
worth  to  the  farmer  a  good  deal  more  than  the  5  per 
cent,  rental  which  he  was  paying  to  the  Government. 
But  gradually  the  perpetual  leases  were  converted  into 
freeholds,  and  on  March  31,  1909,  only  86,908  acres  were 
held  under  that  tenure.  Doubtless,  most,  if  not  all  of 
these  holdings  will  be  converted  into  freeholds  before  the 
expiration  of  the  30-year  period.  The  perpetual  lease 
was  superseded  by  the  methods  introduced  by  the  Land 
Act  of  1892.  (Official  Handbook,  1892,  pp.  92,  283. 
Official  Year-Book,  1893,  pp.  118,  364.  Year-Book, 
1894,  pp.  148,  209.     Year-Book,  1909,  p.  516.) 

The  next  Minister  for  Lands  was  Ballance,  who  was 
even  more  strongly  in  favour  of  land  nationalization  than 
was  Rolleston.  In  1885  he  repeated 
the  attempt  made  by  Rolleston  and  No  Revaluation 
sought  to  lay  down  the  principle  that 
the  State  should  retain  one-third  of  its  lands  for  all 
time,  to  be  leased  on  condition  of  periodical  revaluation.' 
A  long  struggle  again  ensued,  but  a  similar  fate  befell 
his  bill,  and  the  right  of  purchase  was  again  inserted. 

The  third  Minister  for  Lands  who  tried  to  establish 


24    STATE  SOCIALISM   IN  NEW  ZEALAND 

the  principle  of  State  ownership  was  McKenzie,  Minister 
for  Lands  and   Immigration  and  Agri- 
The  Lease  in       culture  in  the  Ballance  Cabinet.     Mc- 
Perpetuity  Kenzie    was    a    Highlander    of    strong 

personality,  deeply  impressed  with  the 
evils  of  land  monopoly  in  Scotland  and  determined  at  all 
costs  to  prevent  such  a  system  in  New  Zealand.  He  felt 
that  once  the  freehold  was  granted,  there  was  nothing 
to  prevent  the  rich  man  from  buying  out  the  small  settler. 
He  believed  that  the  only  way  to  prevent  the  aggregation 
of  large  estates  was  for  the  State  to  retain  the  land  and 
lease  it.  But  he  was  a  practical  farmer,  and  when  the 
objection  was  raised  that  the  farmer  would  not  cultivate 
the  land  as  well  under  the  system  of  leasing  as  under  the 
fieehold  system,  he  decided  to  give  the  tenant  a  term 
which  was  as  good  as  the  freehold,  but  to  retain  the 
nominal  ownership  in  the  hands  of  the  State  to  prevent 
the  building  up  of  large  estates.  He  therefore  granted 
leases  for  999  years  at  a  fixed  rental  without  any  period- 
ical appraisement,  but  also  without  the  right  of  purchase. 
The  rental  was  calculated  at  4  per  cent,  on  the  capital 
value  of  the  land  at  the  time  the  lease  was  taken  up. 
Certain  conditions  were  imposed  upon  the  lessee  in 
regard  to  residence  and  improvements,  and  it  was  pro- 
vided that  no  lessee  should  hold  more  than  one  lease  in 
perpetuity  except  under  certain  special  circumstances. 
(The  Land  Act,  1892.) 

The  bill  was  bitterly  opposed  by  Rolleston.    He  said : 

"  The  lease  in  perpetuity  that  the  Government  has  accepted 
is  practically  a  freehold,  and  there  is  no  man 
Evils  of  the  who  doubts  for  a  moment  that  the  residential 

New   Lease  tenure  of  the  Act  will  very  shortly  be  done  away 

with.  It  will  not  require  more  than  two  or 
three  years  before  the  people  will  rise  against  the  persecutions, 
limitations,  and  vexatious  annoyances  such  as  appear  under  this 
bill.  There  is  no  unearned  increment  to  come  in,  no  provision  for 
revenue  in  aid  of  local  government,  no  aid  to  taxation  in  the  future. 


LAND  TENURE  25 

This  bill  as  it  must  be  carried  out  will  destroy  the  land  revenue.  It 
fosters  evasion,  gambling  and  speculation."  (Parliamentary  Debates, 
Vol.  78,  p.  61,  Sept.  13,  1892.) 

Mr.  Fish  was  even  more  bitter  in  his  denunciation  of 
the  bill.    He  said: 

"  This  unearned  increment  will  go  simply  into  the  pockets  of 
those  who  choose  to  speculate  in  this  new  system  of  freehold  land- 
tenure;  because  I  maintain  that  it  is  practically  a  system  of  freehold 
land-tenure  with  this  small  and  trifling  difference;  that  in  the 
case  of  an  ordinary  freehold  tenure  the  purchaser  has  to  deposit 
cash  with  the  Crown,  but  the  fortunate  recipient  of  one  of  these 
leases  in  perpetuity  obtains  the  freehold  of  his  land  —  because  if  a  999 
years'  lease  is  not  a  freehold  in  fact,  then  I  know  not  the  meaning  of 
the  words  —  without  the  small  consideration  of  paying  any  cash 
down  for  it.  .  .  .  Instead  of  having  roads,  and  bridges  and 
railways  made  out  of  the  proceeds  of  our  land  sales,  or  out  of  the 
unearned  increment,  we  shall  have  to  make  our  roads  and  bridges 
out  of  fresh  taxation  on  the  people,  which  will  press  on  two  thirds  of 
the  population,  who  will  not  settle  on  the  land.  ...  I  have 
no  hesitation  in  saying  that  it  would  be  the  best  policy  this  House 
could  pursue  to  sell  every  acre  of  the  land  it  has,  or  may  have  in  the 
future,  as  speedily  as  possible,  and  merely  restrict  the  area  to  be  held 
by  one  man,  and  by  legislative  taxation  compel  cultivation  of  the 
land  suitably  by  those  who  hold  it  in  large  areas."  (Parliamentary 
Debates,  Vol.  78,  pp.  63-69.) 

This   amazing   tenure,    the    "  lease   in   perpetuity," 
popularly  known  as  "  the  eternal  lease,"  has  during  recent 
years  formed  the  storm  centre  of  New 
Zealand  politics.     Despite  the  criticism      The  Eternal 
to  which  it  was  subjected  in  Parliament      Lease 
and  elsewhere,  its  author  does  not  seem 
to  have  realized  what  its  results  would  be.    It  meant  that 
for  ten  centuries  the  State  parted  with  all  its  interest  in 
the  land  save  4  per  cent,  rental  on  the  original  value.    It 
meant  that  in  the  course  of  a  century  or  less,  the  State 
would  probably  be  losing  more  by  way  of  land  tax  than 
it  got  by  way  of  rent ;  that  no  matter  what  increase  in  land 
values  took  place,  owing  to  the  construction  of  roads  and 
railways,  the  State  could  claim  nothing  more  than  the 
ordinary  and  graduated  land-tax  on  the  lessee's  interest. 

No  one  can  be  said  to  have  begun  to  understand  the 


26    STATE  SOCIALISM   IN  NEW  ZEALAND 

elementary  principles  of  land  tenure  in  New  Zealand  who 
cannot  distinguish  between  the  "  perpetual  lease  "  of 
Rolleston  and  Ballance  and  the  "  lease  in  perpetuity  "  of 
McKenzie,  By  the  Act  of  1892  the  granting  of  Crown 
lands  under  the  system  of  perpetual  lease  was  abolished, 
and  the  lease  in  perpetuity  took  its  place.  Crown  lands 
could  still  be  bought  for  cash,  or  the  settler  could  obtain 
a  license  for  occupation  with  right  of  purchase  within 
twenty-five  years,  but  the  lease  in  perpetuity  soon 
became  the  most  popular  system.  Although  the  area 
which  could  be  held  by  one  man  was  limited  to  640  acres 
of  first-class  land  or  2,000  acres  of  second-class  land,  the 
advantages  to  the  tenant,  especially  to  the  poor  settler, 
were  obvious.  He  had,  for  all  practical  purposes,  a  free- 
hold without  having  to  buy  the  land.  However,  the 
lease  in  perpetuity  was  inferior  to  the  perpetual  lease, 
from  the  point  of  view  of  the  lessee,  in  that  there  was  no 
right  of  purchase. 

In  the  year  ending  March  31,  1894,  34,327  acres  of 
Crown  lands  were  bought  for  cash,  108,133  acres  were 
taken  under  the  system  of  occupation  with  right  of  pur- 
chase, and  179,993  acres  were  taken  under  the  lease  in 
perpetuity.  Up  to  March  31,  1909,  about  2,418,000 
acres  had  been  taken  under  the  lease  in  perpetuity  by 
5,174  tenants.  (Year-Book,  1902,  p.  443.  Year-Book, 
1909,  p.  516.) 

The  Colony,  soon  after  this  system  of  land  tenure  was 

begun,  entered  on  an  era  of  unexampled  prosperity.    The 

result  was  that  land  v^alues  increased  in 

e     rown  ^    marked   degree.      The   tenants,    who 

Tenants  ask  for  ,  ,  ,  ,  , 

the  Freehold         soon  numbered  some  thousands,  waxed 

prosperous,  and  after  about  ten  years 

they  began  to  ask  for  the  right  to  buy  the  freehold  of 

their  properties.    The  chief  reasons  urged  for  this  course 

were: 


LAND  TENURE  27 

(i)  That  it  would  pay  the  Colony  to  sell  the  freehold 
and  expend  the  money  received  in  purchasing  large 
estates  for  subdivision  and  closer  settlement,  instead  of 
borrowing  millions  abroad  for  this  purpose  and  remitting 
the  greater  part  of  the  rents  to  the  foreign  money-lender 
by  way  of  interest. 

(2)  That  the  restrictions  as  to  cropping,  personal 
residence  on  the  property,  and  other  covenants  in  their 
leases  were  vexatious,  and  that  by  purchasing  the  free- 
hold they  could  farm  their  lands  as  they  wished. 

(3)  That  the  labour  unions  and  single-tax  advocates 
were  agitating  for  reappraisement  of  lands  and  readjust- 
ment of  rents,  although  the  lands  had  been  leased  at  a 
fixed   rental  for  999  years. 

As  to  the  last  mentioned  reason,  while  it  has  been 
denied  that  such  agitation  took  place,  without  doubt  the 
labour  party  freely  advocated  this  course. 

Some   of    their    leaders   disavowed    the     ^  ^  j  , 

.  1  1       f     demanded  by 

proposal  as  mvolvmg  a  grave  breach  of  Labour  Unions 
contract  on  the  part  of  the  State,  but 
the  revaluation  of  rents  was  constantly  proposed  at  their 
annual  conferences.  For  example,  at  the  annual  con- 
ference of  the  Trades  and  Labour  Councils  of  New 
Zealand,  held  at  Christchurch  in  April,  1906,  Mr.  Hamp- 
ton moved:  "That  the  Conference  approve  of  the 
abolition  of  sale  of  Crown  lands,  and  provision  for  the 
periodical  valuation  of  all  Crown  lands  held  on  lease,  at 
the  death  of  the  present  lessee,  or  the  transfer  of  the 
lease  to  another  party,  whichever  shall  occur  first."  Mr. 
Paul  moved  an  amendment  providing  simply  for  revalu- 
ation in  future  leases,  saying  that  "  the  proposal  to  inter- 
fere with  existing  contracts  was  immoral  and  unjust." 
The  amendment  was  lost.  Mr.  Breen  then  moved  as  an 
amendment  that  revaluation  take  place  at  the  expiration 
of  50  years  from  the  date  of  issue  of  the  lease.     This 


28    STATE  SOCIALISM   IN   NEW  ZEALAND 

amendment  was  carried,  by  9  votes  to  7,  and  the  original 
motion,  as  amended,  was  carried.  (Report  ®f  Annual 
Conference  of  Trades  and  Labour  Council,  1906,  p.  16. 
Report  of  1907,  p.  12.) 

The  question  soon  became  a  political  one.  This  in 
itself  is  significant,  and  had  been  predicted  as  far  back  as 
1882  by  the  opponents  of  Rolleston's  scheme.  These 
opponents  argued  against  tlie  creation  of  a  State  tenantry 
on  the  ground  that  so  soon  as  the  tenants  became  nu- 
merous enough  to  exercise  political  pressure,  they  would 
demand  the  freehold,  or,  in  times  of  depression,  would 
demand  a  reduction  in  rent.  By  1905  the  pressure  had 
become  so  great  that  even  Seddon  could  not  fend  off 
the  issue  any  longer.  To  gain  time  he  appointed  a  Royal 
Commission  to  report  on  the  whole  subject  of  land 
tenure.  The  Commission  were  divided  in  their  recom- 
mendations, half  advocating  the  granting  of  the  freehold 
on  certain  conditions  and  half  the  contrary. 

After  many  debates  the  legislature,  in  1907,  allowed 
the  right  of  purchase  to  the  lessees  in  perpetuity.    In  the 

words  of  the  Act: 
Restricted  Right  "  Every  owner  of  a  lease  in  perpetuity  shall 

of  Purchase  have  a  right  at  any  time  during  the  existence  of 

the  lease  to  purchase  the  fee-simple  of  the  land 
comprised  In  the  lease  at  a  price  equal  to  the  capital  value  of  the 
said  land  at  the  time  of  the  purchase  thereof.  The  said  capital  value 
shall  be  determined  by  valuation  or  arbitration  in  the  manner  here- 
inafter in  this  section  provided,  and  shall  include  the  value  of  all 
minerals  other  than  gold  and  silver,  but  shall  not  include  the  value 
of  any  improvements  placed  on  the  land  during  the  continuance  of  the 
lease."     (Land  Laws  Amendment  Act,  1907,  Sec.  18.) 

This  concession  has  been  declared  valueless  by  the 
tenants,  who  would  regard  it  as  a  grim  joke  on  the  part 

of  the  legislature  if  they  did  not  think 
At  What  it  a  step  toward  further  concessions  at  a 

Valuation?  later  date.    The  whole  question  at  stake 

was:  "What  was  to  be  treated  as  the 
value  of  the  land  —  the  original  value  at  the  time  the 


LAND  TENURE  29 

tenant  took  his  lease,  or  the  value  at  the  time  of  pur- 
chasing the  freehold?"  The  question  was  important, 
because  the  rent  payable  to  the  Government  was  in 
most  cases  less  than  the  annual  value  of  the  land,  and 
many  tenants  had  bought  their  leases  and  paid  thousands 
of  pounds  for  them.  If  they  had  to  pay  over  again  to  the 
State  for  the  right  to  become  freeholders  at  the  present 
value  of  the  land,  they  would  be  paying  twice  over  for  the 
same  thing.  The  State  had  granted  leases  for  999  years 
at  a  fixed  rental,  without  revaluation,  hence  its  only 
interest  in  the  land  was  the  capitalized  rental  of  4  per 
cent,  on  the  original  value. 

On  the  part  of  the  State  it  was  argued  that  the 
tenant,  in  getting  the  freehold,  was  getting  something 
which  he  had  not  bargained  for  and  that  it  would  be 
monstrous  to  allow  him  to  purchase,  at  the  original  value, 
lands  which  had  doubled  and  trebled  in  value  since  they 
were  taken  up.  If  the  tenant  had  wanted  the  freehold, 
why  had  he  not  bought  it  at  the  beginning?  And  yet, 
the  State  would  gain  by  selling  the  freehold  at  the  original 
value,  for  it  would  be  relieved  of  the  trouble  and  expense 
of  administering  the  public  estate,  would  be  getting  4  per 
cent,  money  in  New  Zealand  instead  of  borrowing  it 
abroad,  and  would  get  additional  revenue  in  the  form 
of  land  tax  on  all  the  larger  estates.  It  is  surprising  to 
find  single- taxers,  like  Mr.  Fowlds,  Mr.  Ell,  and  Mr. 
Laurenson,  opposing  the  freehold.  Logically,  they 
should  be  freeholders,  for  the  simplest  way  of  getting  the 
"  unearned  increment,"  as  Henry  George  has  shown,  is 
to  let  private  persons  hold  the  land  and  to  take  all  the 
rent  away  from  them  by  a  tax  on  the  unimproved  value. 
But  the  concession  of  1907  was  welcomed  by  the  free- 
holders as  a  step  in  the  right  direction.  Mr.  Mander 
said,  speaking  of  the  freehold: 


30     STATE  SOCIALISM   IN   NEW  ZEALAND 

"  We  have  got  a  shadow  of  it,  but  we  shall  have  the  substance 
later  on;  we  are  quite  satisfied  about  that  point."  (Parliamentary 
Debates,  Vol.  141,  p.  681,  Oct.  21,  1907.) 

The  lease  in  perpetuity  was  abolished  by  the  Act  of 
1907.      This   course  met  with   universal  approval   and 
partially    corrected    one    of    the    worst 
The  Renewable     blunders  ever  made  in  land  legislation. 
Lease  The  new  law,  however,  could  only  apply 

to  the  future,  and  under  the  lease  in  per- 
petuity system,  which  had  been  in  force  for  fifteen  years, 
over  two  million  acres  of  the  best  land  of  the  Colony  had 
been  parted  with.  In  its  place  was  enacted  the  "  renew- 
able lease,"  a  lease  for  66  years,  with  provision  for  valua- 
tion and  renewal  at  the  end  of  the  term  at  a  reappraised 
rent.    (Land  Laws  Amendment,  1907.) 

The  Act  of  1907  did  not  abolish  the  other  forms  of 
tenure,  for  public  lands  may  still  be  sold  for  cash  or  on 
the    occupation-with-right  -  of  -  purchase 
Other  Forms        system.    The  leasing  system  has  always 
of  Tenure  been  only  one  of  three  methods  of  dis- 

posing of  Crown  lands.  From  1882  to 
1892,  lands  might  be  sold  for  cash  or  on  the  deferred- 
payment  system,  or  on  perpetual  lease  with  right  of 
purchase.  From  1892  to  1907,  the  two  former  systems 
continued,  while  the  lease  in  perpetuity  was  substituted 
for  the  perpetual  lease.  In  1907,  the  renewable  lease 
took  the  place  of  the  lease  in  perpetuity,  the  other  sys- 
tems remaining  as  before.  It  is  commonly  believed  in 
America  and  elsewhere  that  all  the  land  in  New  Zealand 
is  owned  by  the  State.  How  far  this  opinion  is  from  the 
truth  is  shown  by  the  fact  that  on  March  31,  1906,  there 
was  held  as  freehold  more  than  18,500,000  acres  of  rural 
land.  (Year-Book,  1909,  p.  447.)  At  this  time  the  total 
area  of  66,861,440  acres  was  held  roughly  as  follows: 


LAND  TENURE  31 

Freehold 18,500,000 

Leased  from  Crown 17,000,000 

Held  by  natives 8,250,000 

Reserves  for  educational  purposes  and  national  parks.  .  12,250,000 

Unfit  for  use 7,000,000 

Not  yet  dealt  with 3,300,000 

In  1906  the  Government  proposed  that  no  more 
Crown  lands  should  be  sold,  but  this  proposal  met  with 
such  strong  opposition  that  it  had  to  be 
modified.  Accordingly,  in  1907,  "  The  National 
National  Endowment  Act  "  was  passed.  Endowments 
setting  apart  7,000,000  acres  of  Crown 
land  as  a  permanent  endowment  for  educational  pur- 
poses and  to  assist  in  paying  old-age  pensions,  and 
provision  was  made  for  ultimately  increasing  the  area 
to  9,000,000  acres.  The  Act  expressly  provides  that 
these  lands  shall  not  be  sold  for  cash,  nor  disposed  of 
under  the  occupation-with-right-of-purchase  tenure. 
(Year-Book,  1909,  p.  664.)  But  even  this  measure  would 
not  have  been  accepted  had  not  the  avowed  object  been 
to  create  endowments  for  specific  purposes,  and  had  not 
other  legislation  in  the  same  year  made  it  probable  that  by 
increased  taxation  of  large  estates,  and  by  the  acquisition 
by  the  State  of  native  lands  for  settlement,  large  areas 
of  freehold  would  be  thrown  upon  the  market. 

A  further  concession  to  the  freeholders  was  proposed 
by  the  Government  in  the  session  of  1909,  when  a  bill 
was  brought  down  providing  that  the  lessees  of  land 
held  on  the  lease  in  perpetuity  or  the  renewable  lease 
might  acquire  the  freehold  by  purchase  at  the  original 
value,  but  with  the  provision  that  the  land  should  be 
revalued  at  intervals  of  33  years  and  that  at  these  times 
20  per  cent,  of  the  increment  during  the  preceding  33 
years  should  be  payable  to  the  Crown.  After  five  such 
intervals,  the  holders  of  leases  in  perpetuity  were  to 
acquire   the   fee-simple,   but   the  holders  of  renewable 


32     STATE  SOCIALISM   IN  NEW  ZEALAND 

leases  were  to  have  their  land  revalued  at  perpetually 
recurring  intervals.  In  this  respect  the  bill  was  similar 
to  the  proposals  of  Lloyd-George  in  the  celebrated  Bud- 
get of  1909.  The  bill  was  another  attempt  to  effect  a 
a  compromise  between  freeholders  and  leaseholders,  but 
was  not  satisfactory  to  either  party,  and  was  dropped. 
(Evening  Post,  Wellington,  Nov.  24,  1909.  The  Press, 
Christchurch,  Nov.  25,  1909.) 

It  may  be  that  the  new  system  of  renewable  lease 
will  prove  profitable  to  the  State  and  satisfactory  to  the 
tenant  —  time  alone  will  show.    But  the 
State  Tenants      chief  danger  of   a  large  state  tenantry 
in  Politics  has  already  been  strikingly  illustrated, 

namely,  the  immense  political  pressure 
which  they  can  exercise.  There  were,  on  March  31, 
1909,  25,204  Crown  tenants,  holding  18,264,083  acres, 
and  there  can  be  no  question  that  they  will  agitate  for  the 
freehold  so  long  as  there  is  the  slightest  chance  of  getting 
it,  and  in  their  demands  they  will  be  supported  by  about 
45,000  freeholders  of  country  lands,  most  of  whom  are 
strong  upholders  of  the  tenure  which  they  enjoy.  (Year- 
Book,  1909,  pp.  447,  517.)  Even  if  they  do  not  succeed 
in  obtaining  the  freehold,  they  are  quite  likely  to  clamor 
for  reduction  in  rents  in  times  of  depression,  as,  indeed, 
they  have  already  done.  One  witness  before  the  Land 
Commission  of  1905,  on  being  pressed  to  give  reasons 
or  his  belief  in  the  freehold,  said: 

"  I  believe  in  the  freehold  because  the  freeholder  is  the  man 
to  whom,  in  times  of  trouble,  the  State  will  look;  and  the  leaseholder 
is  the  man  who,  in  times  of  trouble,  will  look  to  the  State." 

No  doubt,  as  the  industrial  population  grows  larger, 
and  the  agricultural  and  pastoral  interests  become  less 
dominant  in  political  life,  further  attempts  will  be  made 
to  extend  the  principle  of  state  ownership.     But  hitherto 


LAND  TENURE  33 

the  farmer  has  proved  too  strong  for  the  laud  reformer; 
and,  if  he  has  not  succeeded  altogether  in  getting  his  own 
way,  he  has  at  least  prevented  the  theory  of  state 
ownership  from  being  carried  to  its  legitimate  conclusion. 
But  the  advantages  of  state  ownership  have  been  much 
exaggerated  and  it  is  not  easy  to  show  that  New  Zealand 
has  derived  any  benefit  that  could  not  have  been  obtained 
from  freehold  tenure  combined  with  taxation  of  land 
values.  It  is  probable  that  had  the  efforts  of  the  legisla- 
ture in  the  past  been  concentrated  upon  the  prevention  of 
land  monopoly  and  closer  settlement  on  freehold  farms, 
more  progress  would  have  been  made  than  has  been 
possible  on  the  lines  attempted  in  the  past. 


CHAPTER   III 
LAND   MONOPOLY 

The  climatic  conditions  of  New  Zealand,  as  com- 
pared with  those  of  America,  go  far  to  explain  why  land 
Comparative  monopoly  has  been  more  common  in  the 
Size  of  Holdings  former  country  than  in  the  latter.  In 
in  New  Zealand  the  northern  parts  of  The  United  States, 
and  America  ^^^  jj^  Canada,  the  severe  winters  make 
it  difficult  for  a  man  to  hold  more  than  a  very  limited 
area  of  land.  The  season  during  which  he  can  sow  and 
reap  is  short,  and  during  the  winter  he  must  house  and 
feed  his  stock.  Again,  in  the  arid  region  only  so  much 
land  can  be  used  as  the  farmer  can  effectively  irrigate. 
In  New  Zealand,  on  the  contrary,  the  climate  is  so  mild 
that,  except  in  the  high  country,  the  farmer  can  work 
his  ground  in  midwinter,  while  sheep  and  cattle  can 
remain  on  the  open  pasture  all  the  time.  Indeed,  the 
only  limit  to  the  extent  of  country  a  farmer  can  stock  is 
the  limit  of  his  purse.  Because  of  the  mild  climate,  and 
because  of  the  remoteness  of  New  Zealand  from  the 
markets  of  the  world,  the  country  was  more  suited  to 
sheep  raising  than  to  agriculture,  and  sheep  raising  is  an 
industry  that,  in  such  a  climate,  is  most  profitable  when 
carried  on  on  a  large  scale.  The  United  States  and 
Canada  are  in  most  parts  better  suited  to  agriculture 
than  to  the  raising  of  cattle  or  sheep,  and  mixed  farming 
is  usually  more  profitable  than  the  growing  of  staple 
crops,  so  that  there  has  been  a  strong  tendency  toward  a 
system  of  farming  on  a  small  scale,  and  this  tendency  has 
been  greatly  encouraged  by  the  homestead  laws.     But 

34 


LAND  MONOPOLY  35 

legislation  has  had  little  to  do  with  the  agricultural  devel- 
opment of  the  United  States  and  Canada,  whereas  the 
development  of  agriculture  was  so  slow  in  New  Zealand 
that  the  small  farmers  and  the  landless  people  thought 
it  necessary  to  pass  laws  for  the  purpose  of  hastening 
economic  development,  so  that  the  country  might  not 
long  remain  a  vast,  thinly  populated  sheep-run,  but 
might  soon  become  a  closely  settled  agricultural  com- 
munity. 

These  facts  explain  to  a  large  extent  why  the  holding 
of  large  tracts  of  land  has  been  such  a  burning  question 
almost  from  the  time  of  the  first  settlement.  A  class 
struggle  has  been  going  on  between  the  large  run-holders, 
on  the  one  hand,  and  the  small  sheep  raisers  and  agri- 
culturists, on  the  other,  a  struggle  in  which  the  large 
holders  for  a  long  time  had  the  upper  hand,  though  the 
small  farmers  were  in  the  end  victorious,  by  means  of  the 
ballot  and  the  political  revolution  of  1890. 

In  the  North  Island  so  large  an  area  was  covered  with 
forest,  and  conflicts  with  the  natives  were  so  frequent, 
that  the  progress  of  pastoral  pursuits  was 
retarded.  But  in  the  South  Island  the  Origin  of 
wide  fertile  plains  of  Canterbury  offered  Large  Holdings 
a  tempting  field  for  pastoral  life.  On 
these  plains  occurred  the  most  classic  examples  of  land 
grabbing  that  New  Zealand  has  seen.  And  yet,  the  early 
land  regulations  seem  to  have  been  expressly  designed  to 
prevent  the  creation  of  large  estates.  The  public  lands 
of  Canterbury  were  originally  opened  for  sale  at  £3  an 
acre,  later  at  £2.  The  purchaser  selected  and  applied  for 
his  land,  and,  on  payment  of  the  price,  received  a  license 
to  occupy.  The  land  was  then  surveyed  and  a  Crown 
grant  was  issued.  The  price  was  high  as  compared  with 
the  price  of  land  in  other  parts  of  the  Colony,  and  was 


36     STATE  SOCIALISM  IN  NEW  ZEALAND 

expressly  designed  to  insure  close  settlement,  in  accord- 
ance with  the  Wakefield  policy. 

How  then  was  it  possible  to  acquire  large  holdings? 
The  explanation  lies  in  the  fact  that  until  land  was  pur- 
chased from  the  Crown  it  could  be  rented  for  pasturage 
purposes  at  a  nominal  rental  of  £i  per  loo  acres.  A 
tenant  pasturing  sheep  under  these  licenses  held  the  land 
subject  to  the  right  of  any  settler  to  select  and  pay  the 
Government  for  any  part  of  it;  whereupon  the  sheep- 
farmer's  license  ceased  as  to  that  part.  His  occupancy 
was  intended  to  be  temporary,  and  subordinate  to  the 
claims  of  the  farmer  when  the  farmer  should  arrive. 

But  the  wishes  of  the  sheepfarmer  by  no  means 
coincided  with  the  intentions  of  the  founders  of  the 
Stru<i<ile  province.      It    was    not    long    before    a 

between  Squat-  limited  number  of  squatters  held  im- 
ters  and  Small  mense  areas  —  indeed  all  the  best  lands 
Farmers  ^f    ^^^    province  —  under    licenses     to 

depasture.  They  next  directed  their  efforts  toward 
retaining  possession  without  purchasing  the  land.  In 
this  they  succeeded  to  a  large  extent,  as  is  shown  by  the 
great  holdings  in  Canterbury,  which  have  descended  to 
the  present  generation  like  the  lands  of  the  great  county 
families  in  England. 

The  methods  adopted  were  as  various  as  they  were 
ingenious.  For  example,  for  each  shepherd's  hut  they 
received  by  law  what  was  called  a  pre-emptive  right 
over  50  acres  besides  a  homestead  pre-emptive  right 
over  250  acres.  For  every  38  1-2  chains  of  wire  fenc- 
ing erected  they  received  a  pre-emptive  right  over  50 
acres.  The  squatter  was  thus  granted  the  first  right  to 
buy  the  areas  in  question,  but  without  being  compelled 
to  do  so  for  a  number  of  years,  so  that  by  running  sub- 
division fences  up  all  the  watered  valleys  and  across  all 


LAND  MONOPOLY  37 

open   flats   nearly   the  whole   ranch   could   be   secured 
against  purchase  by  outsiders. 

"  Gridironing  "  consisted  in  buying  a  series  of  20-acre 
sections  so  surveyed  as  to  leave  19  acres  unbought  be- 
tween each  two  sections  bought ;  and  as  no  one  could  buy 
less  than  20  acres  without  going  to  auction,  the  alternat- 
ing 19-acre  sections  were  left  to  be  occupied  by  the 
runholder. 

"  Spotting  "  consisted  in  buying  small  sections  of 
from  20  to  100  acres  so  as  to  include  all  the  available 
creeks,  rendering  the  adjoining  ridges  secure  from  pur- 
chase owing  to  lack  of  water.  A  close  watch  was  kept 
on  strangers,  and  if  it  was  supposed  that  they  desired  to 
purchase  any  piece  of  land,  the  runholder  sent  post  haste 
to  the  land  office  and  forestalled  them.  One  writer  has 
said  that  "  a  man  wanting  a  bit  of  land  had  to  take  as 
many  precautions  as  he  would  in  Scotland  to  stalk  a  stag 
in  a  well-preserved  deer  forest."  A  settler  was  looked 
on  as  an  intruder  and  a  mean  fellow,  if  he  outwitted  the 
runholder  and  secured  a  piece  of  land  which  the  latter  was 
supposed  to  occupy  merely  pending  closer  settlement. 
When  a  "  cockatoo,"  as  the  small  settler  was  called, 
managed  to  secure  land,  the  runholder  took  care  to 
leave  a  narrow  strip  of  land  between  their  holdings  so  that 
the  whole  cost  of  fencing  must  be  borne  by  the  "  cocka- 
too." 

For  a  long  time  the  political  power  was  in  the  hands 
of  the  large  landholders,  who  made  the  laws  and  spent 
the  public  funds  on  roads  which  fronted 
their  lands.     In  some  ways  they  encour-  Political  Power 
aged    immigration,   but  were   unwilling  of  the  Squattera 
to  cut  up  their  estates  and  sell  the  land  to 
small  farmers,  even  at  a  high   price.     They  had   the 
English  idea  of  building  up  a  great  landed  estate  and 


238582 


38      STATE  SOCIALISM  IN  NEW  ZEALAND 

founding  a  family.  Newcomers,  in  their  view,  should 
settle  in  the  back  blocks,  as  they  had  done,  for  there 
was  still  much  unoccupied  land,  particularly  in  the 
North  Island.  Why  should  immigrants  who  knew 
nothing  of  pioneer  life  be  allowed  to  dispossess  the  old 
settlers,  who  had  built  up  the  country?  Besides,  sheep 
farming  was  an  industry  that  should  be  carried  on  on  a 
large  scale,  and  much  of  the  land  was  not  well  suited  to 
agriculture.  In  fact,  it  must  not  be  thought  that  all  of 
the  argument  was  on  the  side  of  the  small  farmer,  for  it 
would  not  be  difficult  to  present  a  plausible  case  for  the 
large  landholders,  who  think  that  they  have  been  very 
badly  treated  and  that  the  Dominion  would  have  been 
just  as  prosperous  if  they  had  been  let  alone  and  if  the 
country  had  been  allowed  to  develop  in  the  natural  way, 
without  any  governmental  interference. 

But  immigrants  continued  to  arrive  in  large  numbers; 
the  number  of  small  farmers  increased ;  also  the  number 

of  shepherds  and  agricultural  labourers; 
Political  Power  ^^j^^  ^j^j^  ^j^^  workers  of  the  towns 
of  the  Small  ,      ,  ,,      .       i  r  i 

Farmers  ^"^    ^"^    small    shopkeepers,    formed    a 

strong  and  growing  party,  whose  inter- 
ests were  largely  opposed  to  those  of  the  large  land- 
holders, and  who,  when  they  obtained  the  political  power 
in  1890,  under  the  leadership  of  Ballance,  proceeded  to 
apply  a  series  of  legislative  remedies  to  the  evils  of  land 
monopoly.  (Reeves,  "State  Experiments,"  Ch.  2; 
Ch.  6.) 

A.  THE  LAND  FOR  SETTLEMENTS  ACTS 

Measures  were  introduced  by  Rolleston,  Sir  George 
Grey,  and  Ballance,  at  various  times,  having  for  their 
Compulsory  object  the  acquisition  and  cutting  up  of 

Purchase  and  large  estates  for  closer  settlement.  But 
Subdivision  "  The  Land  for  Settlements  Act,  1892," 


LAND  MONOPOLY  39 

which  was  passed  under  the  guidance  of  the  Hon.  (after- 
wards Sir)  John  McKenzie,  forms  the  substantial  start- 
ing-point of  this  policy.  This  Act  "  authorized  the  pur- 
chase from  private  individuals  of  suitable  properties  for 
subdivision  into  small  farms  not  exceeding  320  acres  in 
extent."  (Year-Book,  1894,  p.  204.)  The  Government 
was  authorized  to  expend  £150,000  a  year  in  this  manner, 
but  there  was  to  be  no  compulsory  purchase.  In  debating 
the  bill  in  the  Council,  the  Hon.  E.  C.  J.  Stevens,  of 
Canterbury,  said: 

"  I  am  glad  to  hear  the  honourable  gentleman's  assurance  that 
he  did  not  mean  that  in  the  near  future,  or  at  any  other  time,  it  was 
intended  to  seize  land  compulsorily.  .  .  .  My  own  view  is  that, 
so  long  as  there  is  any  land  belonging  to  the  Crown,  and  so  long  as 
there  is  a  prospect  of  acquiring  land  from  the  natives,  it  would  be 
infinitely  better  to  exhaust  that  chance  of  obtaining  land  for  the 
people  before  resorting  to  any  steps  of  this  character.  .  .  I  do 
not  think  that  the  Government  will  be  successful  in  obtaining  bar- 
gains, and,  if  it  is  not  successful  in  obtaining  bargains,  then  there 
will  be  no  increment  enjoyed  by  the  farmer  in  any  degree  commen- 
surate with  that  which  he  would  obtain  if  he  settled  on  the  waste 
lands  of  the  Crown."  (Parliamentary  Debates,  Vol.  78,  p.  319, 
Sept.  23,  1892.)  Referring  to  the  Act  of  1892,  the  Year-Book  for  1894 
says:  "  An  extension  of  the  provisions  of  the  Act  would  prove  bene- 
ficial in  providing  homes  for  a  large  class  of  persons,  who,  from  inex- 
perience or  other  reasons,  are  in  a  measure  prohibited  from  occupying 
the  waste  lands  of  the  Crown;  and,  moreover,  as  the  properties  ac- 
quired are  all  more  or  less  improved,  they  seem  to  afford  to  the  small- 
farmer  class  of  the  Old  Country  an  opening  for  building  up  homes 
for  themselves  where  their  previous  experience  will  be  of  use,  instead 
of  having  to  learn  —  often  by  sad  experience  —  the  methods  adapted 
to  a  new  and  wild  country." 

The  Government  found,  as  Mr.  Stevens  had  prophe- 
sied, that  it  was  difficult  to  purchase  suitable  estates 
on   "reasonable"   terms.     The  Act  of 
1892  was  therefore  repealed  and  "The        Jhe  Land  for 
T         1    r        <-       1  A  ^        ,.  Settlements 

Land  tor  Settlements  Act,   1894,     was       ^^^   jg^^ 

passed,  giving  the  power  of  compulsory 
purchase  in  cases  where  the  Board  could  not  agree  with 
the  owner  as  to  terms  of  sale,  the  amount  payable  to 
the  owner  to  be  decided  by  a  Compensation  Court  with 


40     STATE  SOCIALISM  IN  NEW  ZEALAND 

full  powers.    Also,  the  amount  which  might  be  expended 
yearly  was  increased  to  £250,000.     (Year-Book,   1895, 

p.  253-) 

The  Act  has  been  amended  a  number  of  times,  was 
consolidated  in  1900,  and  again  in  1908.  The  amount 
which  may  be  expended  yearly  is  limited  to  £750,000. 
Properties  are  purchased  under  the  advice  of  a  Board 
of  Land  Purchase  Commissioners.  The  lands  are 
divided  into  small  farms,  and  leased  at  a  4  1-2  percent, 
rental  on  a  capital  value  sufficient  to  cover  the  total 
cost  of  the  estate,  including  cost  of  survey,  roads,  etc. 
Formerly  a  lease  in  perpetuity  was  given,  but  now  the 
lease  is  for  33  years  with  a  perpetual  right  of  renewal  for 
successive  terms  of  33  years  on  a  rent  to  be  determined 
by  revaluation. 

Where  the  price  could  not  be  agreed  on,  it  was 
formerly  fixed  by  a  judge  of  the  Supreme  Court  and  two 
assessors,  one  chosen  by  the  Government 
Valuation  by  and  one  by  the  owner,  but  this  system 
Self-assessment  proved  highly  unsatisfactory ;  the  litiga- 
tion was  protracted  and  costly;  and  there 
was  a  flagrant  conflict  of  opinion  between  alleged  experts 
as  to  the  value  of  the  land.  For  example,  in  the  case  of 
the  last  estate  acquired  under  this  system,  there  was  a 
difference  of  no  less  than  £30,000  between  the  average 
valuations  of  the  property  by  the  Government  and  the 
owner,  the  average  of  the  Government's  valuation  being 
£100,000  and  that  of  the  owner  £130,000.  To  overcome 
these  difficulties  it  was  enacted  in  1908  that  the  compen- 
sation payable  to  the  dispossessed  owner  should  be  the 
unimproved  value  of  the  land  as  appearing  in  the  valua- 
tion roll  upon  which  the  owner  has  been  paying  rates, 
plus  10  per  cent,  of  the  total  value  up  to  £50,000,  and  an 
additional  5  per  cent,  on  the  value  in  excess  of  that 


LAND  MONOPOLY  41 

amount.  The  amount  payable  for  improv^ements  is  still 
estimated  by  the  Compensation  Court.  To  the  total 
amount  so  ascertained  another  2  per  cent,  is  added  by  way 
of  compensation  for  the  compulsory  taking,  (Year- 
Book,  1909,  p.  666.  Land  for  Settlements  Act,  1908, 
Section  31.) 

Naturally,  this  system  of  compensation  disgusts  the 
large  landowner  and  vastly  amuses  the  proletariat. 
The  "  wool-king  "  is  placed  upon  the  horns  of  as  pretty 
a  dilemma  as  ever  was  constructed.  If  he  seeks  to  have 
his  property  valued  at  a  low  figure  he  reduces  the  amount 
of  his  land  tax  but  increases  the  risk  of  its  being  pur- 
chased by  the  State  for  closer  settlement.  If,  on  the 
other  hand,  he  increases  his  valuation,  as  he  may  do,  he 
avoids  the  risk  of  being  expropriated,  but  subjects  him- 
self to  high  rates  and  taxes. 

This  method  of  self-assessment  is  not  new  in  New 
Zealand,  for  something  very  similar  was  contained  in 
"  The  Land  and  Income  Assessment  Act, 
1891."  According  to  this  Act,  if  the  The  Cheviot 
owner  was  dissatisfied  with  the  Govern-  Estate 
ment's  valuation,  he  could  call  on  the 
Commissioner  to  either  reduce  the  valuation  to  the 
owner's  estimate,  or  to  purchase  the  property  at  that 
valuation.  The  classical  example  is  that  of  the  Cheviot 
Estate,  consisting  of  84,755  acres,  which  was  purchased 
by  the  Government  in  the  year  1893  for  £260,220.  The 
property  had  been  assessed  under  the  Act  at  £304,826, 
but  the  trustees  of  the  estate  objected  to  the  valuation 
and  addressed  a  letter  to  the  Commissioner  of  taxes,  call- 
ing upon  him  to  reduce  the  valuation  to  their  valuation 
of  £260,220,  or  to  take  the  property  at  that  price.  Four 
special  valuations  were  then  made,  all  of  them  higher 
than  the  trustees'  valuation,  and  the  Government  took 


42     STATE  SOCIALISM  IN  NEW  ZEALAND 

over  the  property  at  that  price,  and  proceeded  to  divide 
it  among  a  large  number  of  tenants.  The  trustees  were 
very  much  dissatisfied  at  being  out-bluffed  by  the 
Government.  Many  of  the  tenants  got  leases  which 
have  since  greatly  increased  in  value  and  have  made 
small  fortunes  out  of  their  holdings.  On  March  31, 
1909,  there  were  312  tenants  holding  75,584  acres  of  this 
land,  and  paying  a  yearly  rental  of  £14,587.  The  invest- 
ment has  been  a  fairly  good  one  for  the  Government, 
but  excellent  for  the  leaseholders.  (Year-Book,  1895, 
p.  264.    Year-Book,  1909,  p.  516.) 

The  number  of  properties  acquired  by  the  State 
under  the  Land  for  Settlements  Act,  up  to  March  31,1 909 
was  187.  The  total  area  acquired  was 
Lands  Acquired  1,195,291  acres,  and  the  total  cost  to 
and  Divided  the  State,  including  the  cost  of  roads, 
was  £5,599,680.  The  total  income 
for  the  year,  in  rents  and  interest,  was  £250,623,  while 
the  interest  paid  for  the  money  borrowed  was  £215,828, 
giving  a  balance  of  £34,795.  The  total  number  of  tenants 
was  4,413.  (Year-Book,  1909,  pp.  516-524.  Public 
Accounts  of  New  Zealand,  1909,  pp.  104-109.) 

The  lands  are  leased  in  areas  of  640  acres  of  first-class 
land,  and  in  areas  of  2,000  acres,  when  the  land  is  of  the 
second-class.  Of  the  total  area,  678,923  acres  are  held 
under  leases  in  perpetuity,  155,982  acres  under  renew- 
able lease,  and  218,735  acres  under  small  grazing-run 
leases  and  short  tenures.  The  properties  have  all  been 
purchased  with  money  borrowed  from  abroad.  The 
interest  on  these  loans  must  be  remitted  to  the  foreign 
bondholder,  and  the  only  surplus  which  accrues  to  the 
State  is  the  difference  between  the  rents  received  and 
the  interest  paid  on  the  loans  plus  the  incidental 
expenses.     Up  to  March  31,  1909,  this  difference  was  a 


LAND  MONOPOLY  43 

minus  quantity,  since  the  rents  received  were  £i  ,710,032, 
while  the  Interest  paid  was  £  i  ,331 ,980,  and  the  incidental 
expenses  were  £452,681,  The  balance  shown  in  the 
accounts,  and  the  sinking  fund  deposited  with  the 
Public  Trustee  have  evidently  been  derived  from  loans. 
(Year-Book,  1909,  p.  522.) 

The  administration  of  the  Act,  therefore,  has  in- 
volved a  loss  to  the  Government,  although  closer  settle- 
ment has  been  promoted  and  many  small  farmers  have 
been  greatly  benefited.    In  the  words  of  the  Year-Book: 

"  The  acquisition  of  lands  under  the  Lands  for  Settlement  Act 
has  proved  beneficial  in  providing  homes  for  a  large  class  of  men 
of  moderate  capital  who  shrink  from  the  rough  work  of  breaking  in 
a  new  country,  or  who,  having  accumulated  capital,  prefer  open 
country   near  civilization." 

The  main  defect  in  the  policy  is  that  the  Government 
has  not  tried  to  make  a  profit  out  of  the  transactions,  but 
has  administered  the  Act  for  the  benefit 
of  the  small  farmers  with  too  little  regard  Defects  of  the 
for  the  interests  of  other  classes  of  the  Policy 
people.  Had  the  lands  been  leased  under 
a  system  which  allowed  of  reappraisal  of  the  rents  at 
stated  intervals,  as  under  the  renewable  lease  established 
in  1907,  the  State  might  have  thus  secured  the  "  unearned 
increment."  Or,  had  the  tenants  been  allowed  to  pur- 
chase the  freehold  of  these  lands,  the  State  could  have 
devoted  the  proceeds  of  the  sales  to  the  purchase  and 
division  of  other  estates,  and  this  process  might  have 
gone  on  indefinitely,  without  borrowing  so  much  money 
from  abroad,  while  the  freeholders  would  have  been 
more  contented  than  the  present  leaseholders  are,  and 
might  have  contributed  something  to  the  public  revenue 
by  way  of  a  land-tax.  The  renewable  lease  is  a  vast 
improvement  on  the  lease  in  perpetuity,  but  does  not 
lessen  the  need  for  continual  recourse  to  the  foreign 
money-market  for  further  loans. 


44     STATE  SOCIALISM  IN  NEW  ZEALAND 

The  difficulties  in  the  way  of  continuing  the  policy 
of  purchasing  large  estates  are  increasing  year  by  year. 

There  has  been  during  recent  years 
Temporary  a  marked  rise  in  land  values  due  partly 

Policy  to  high  prices  for  staple  products,  such 

as  wool  and  mutton,  partly  to  the  build- 
ing of  railways  and  other  public  works,  and  partly  to  the 
State's  entering  the  market  as  a  large  buyer  of  land. 
The  result  has  been  a  boom  in  land  values.  Every 
year  it  becomes  more  difficult  for  the  State  to  buy  land 
at  a  price  which  will  allow  of  subdivision  and  leasing  at 
rentals  which  tenants  can  afford  to  pay.  So  the  State 
cannot  go  on  indefinitely  investing  millions  in  land  and 
remitting  the  greater  part  of  the  rents  abroad  by  way  of 
interest.  Also,  as  has  been  shown,  a  large  State  tenantry 
is  a  political  force,  and  just  as  they  have  clamored  for  the 
freehold  so  in  times  of  depression  they  may  clamor  for  a 
reduction  of  their  rents  and  thus  imperil  the  financial 
stability  of  the  Dominion.  Speaking  in  1907  Sir  Joseph 
Ward  said : 

"  I  wpuld  like  to  ask  how  many  honourable  members  are  pre- 
pared to  continue  obtaining  loans  year  after  year  in  order  to  carr>' 
on  the  lands  for  settlement  on  the  present  system.  There  is  not  a 
member  of  the  House  who,  realizing  his  responsibilities,  will  contra- 
dict me  when  I  affirm  that  it  would  be  impossible  for  the  Colony  to 
go  on  borrowing  and  spending  £750,000  a  year  by  the  issue  of 
debentures  in  order  to  acquire  fresh  lands  for  settlement. 
The  position  is  an  impossible  one." 

In  the  same  year  the  attorney  general  admitted  that 
the  State  had  to  pay  too  much  for  a  great  part  of  the  land 
taken,  and  that,  in  a  time  of  depression,  either  the  Crown 
tenant  would  have  to  pay  more  rent  or  else  ask  the 
State  to  take  the  burden  from  him.  How  the  tenant  was 
to  pay  more  rent  in  times  of  depression  the  Attorney- 
General  did  not  explain,  and  the  only  conclusion  is  that 
the  loss  w^ould  fall  on  the  State. 


LAND  MONOPOLY  45 

Summing  up  the  results  of  the  land-for-settlcments 
policy,  it  may  be  said  that  while  it  has  placed  many 
settlers  on  the  land  it  has  done  so  at  too  great  a  cost 
and  at  too  great  a  risk  to  the  community.  For  these 
reasons  the  State  has  recently  turned  its  attention  to 
another  method  of  inducing  subdivision  —  the  pro- 
gressive taxation  of  large  estates. 

B.  THE   GRADUATED   LAND   TAX 

It  seems  likely  that  the  graduated  land  tax  will  be 
increasingly  used  as  a  more  rapid  and  less  costly  means 
of  bringing  about  closer  settlement.  closer  Settle- 
This  method  was  first  adopted  in  1891,  ment  without 
but  before  the  year  1907  the  scale  of  tax-  Cost  to  the 
ation  in  force  had  no  very  marked  effect  Government 
in  breaking  up  the  large  estates.  The  tendency  in  this 
direction  was  largely  negatived  by  family  subdivision  and 
other  methods  of  evasion.  The  ingenuity  displayed  in 
avoiding  the  tax  was  worthy  of  the  best  traditions  of  the 
legal  profession.  The  Hon.  Robert  McNab  in  a  recent 
speech  gave  an  interesting  example.  A  man  with  £50,000 
worth  of  land  would  subdivide  it  into  five  parts  and  make 
a  bogus  sale  of  four  parts  to  four  of  his  shepherds  for 
£10,000  apiece.  The  supposed  buyer  paid  £5  on  account 
and  gave  the  owner  a  mortgage  for  £9,995.  When  the 
officer  who  purchases  land  for  closer  settlement  called, 
he  was  referred  to  the  four  shepherds  as  owners.  The 
individual  areas  were  useless  for  subdivision  after  the 
shepherds  had  retained  the  areas  which  by  law  they  were 
entitled  to  retain  on  purchase  by  the  State.  Thus  the 
real  owner  escaped  from  the  operation  of  the  Land  for 
Settlements  Act.  When  the  taxation  officer  arrived  to 
ask  for  the  graduated  land  tax,  he  also  was  referred  to 
the  shepherd,   who   admitted   that   the  land   belonged 


46     STATE  SOCIALISM  IN  NEW  ZEALAND 

nominally  to  him,  but  claimed  to  have  no  graduated  tax 
to  pay  since  he  was  entitled  to  deduct  from  the  total 
value  the  value  of  the  mortgage  of  £9,995.  The  shepherd, 
of  course,  could  not  pay  interest  on  the  mortgage,  so  he 
leased  the  property  to  the  mortgagee,  the  rent  being 
fixed  at  the  same  amount  as  the  interest  on  the  mortgage. 
Furthermore,  the  mortgage  moneys  became  due  on 
demand  and  the  real  owner  could  at  any  time  resume 
possession.  Meantime  the  owner's  sheep  grazed  all  over 
the  property,  and  everyone  was  happy  except  the  tax 
gatherer.  (Parliamentary  Debates,  Vol.  141,  p.  58, 
Sept.  18,  1907.) 

The  Hon.  Dr.  Findlay,  the  Attorney  General, 
explained  no  less  than  eight  different  devices  for  evading 
the  tax.  It  was  known  that  the  State 
Evasions  lost    £19,000    in    two    years    by    these 

expedients.  What  the  total  loss  was 
cannot  even  be  guessed.  The  chief  means  of 
evasion  were  bogus  partnerships,  one-man  companies, 
collusive  sales  and  leases,  declarations  of  trust,  and 
nominal  gifts.  A  common  device,  of  course,  was  to  cut 
the  property  up  amongst  members  of  the  family  but  to 
continue  to  work  it  as  one  estate.  (Parliamentary  De- 
bates, Vol.  141,  p.  486,  Oct.  10,  1907.) 

The  Land  and  Income  Assessment  Act,  1907,  was 
designed  to  prevent  evasion  as  well  as  to  bring  about  a 
further  subdivision  of  large  estates.  The 
Increasing  the  tax  is  so  high  on  large  estates  that  it 
Graduated  Tax  will  either  compel  the  owners  to  sell  their 
property  or  it  will  largely  augment  the 
revenue  from  land  taxation.  The  following  example 
will  show  the  effect  of  the  new  law.  Under  the  old 
system  an  estate  of  the  unimproved  value  of  £140,000 
might  be  nominally  subdivided  among  a  family  of  ten 
who  would  then  pay  graduated  tax  at  ^-i6d.  in  the 


LAND  MONOPOLY 


47 


pound,  which  would  amount  each  year  to  a  little  over 
£182.  Under  the  new  Act  the  estate  would  be  treated 
as  a  single  estate,  and  would  be  taxed  at  4  i-sd.  in  the 
pound,  which  would  yield  a  yearly  contribution  of 
£2,450,  since  joint  owners  are  assessed  jointly  and 
severally  and  joint  occupiers  as  if  they  were  joint  owners. 

On  an  estate  worth  £200,000  the  graduated  tax  is 
2  1-2  per  cent.,  and  this,  with  the  ordinary  land  tax  in 
addition,  would  amount  to  £5,833.  If  the  owner  lived 
out  of  New  Zealand  and  came  within  the  definition  of  an 
absentee,  his  total  tax  on  such  a  property  would  be  £8,- 
750  :  155.,  or  3.15  per  cent,  on  the  unimproved  value. 

The  following  table  affords  comparison  between 
the  old  and  the  new  rates,  to  which  in  every  case  should 
be  added  the  ordinary  land  tax  of  id.  in  the  pound,  and, 
in  the  case  of  absentees,  50  per  cent,  should  be  added  to 
the  graduated  tax:  (Parliamentary  Debates,  Vol.  141, 
P-  39) 

Unimproved  Value  Graduated  Tax  at  Graduated  Tax  at  New  Rate 
Old  Rate  Increased  by  25  per  cent. 


£ 
40,000.. .  . 
50,000...  . 

60,000 

70,000...  . 
80,000...  . 
90,000.. .  . 

100,000.. .  . 

150,000...  . 

200,000...  . 


£ 
200 
313 
450 
612 
800 
1,012 

1,250 
2,813 
5,000 


The  land  tax,  together  with  other  legislation  and  the 
natural  tendency  toward  the  division  of  large  estates,  a 
tendency  not  so  strong  in  pastoral  as 
in  agricultural  countries,  has  doubtless 
had  some  effect  in  reducing  the  size  of 
the  great  estates.     The   Official   Year-Book    says: 


Effects  of 
the  Tax 


48     STATE  SOCIALISM  IN  NEW  ZEALAND 

"It  would  appear  that  there  has  been  a  reduction  in  the  total 
held  in  areas  of  10,000  acres  and  over  of  2,797,858  acres  during 
the  period  1889-1906.  Purchases  by  Government  contributed  to 
this  result,  but  only  to  the  extent  of  about  one-third,  voluntary 
subdivision  accounting  for  the  balance.  The  average  area  held  by 
owners  of  10,000  acres  and  upwards  shows  a  steady  decrease  since 
1889,  as  follows:    (Year-Book,  1909,  p.  448.) 

Average  area  held 
Year  Acres 

1889 30,009 

1892 29,924 

1902 28,312 

1906 23,061 

An  official  return  presented  to  Parliament  during 
the  session  of  1906  showed  that  there  were  63  rural 
estates  with  an  unimproved  value  of  £50,000  and  up- 
ward, 14  with  an  unimproved  value  of  £100,000  and 
upward,  one  estate  of  218,866  acres  valued  at  £214,978, 
and  one  of  101,221  acres  valued  at  £276,118.  The  capital 
value  of  these  great  estates  was  £296,990  and  £335,405. 
It  is  misleading  to  quote  values  for  purposes  of  compari- 
son, because  land  values  have  risen  greatly  in  the  last 
decade.  The  great  estates  show  a  considerable  decline 
both  in  number  and  acreage.  In  1896-97  there  were 
501  holdings  of  10,000  acres  and  over,  containing  54  per 
cent,  of  the  total  acreage  of  occupied  lands,  and  in  1908- 
09  there  were  470  of  such  holdings,  containing  43  per 
cent,  of  the  total  acreage.  In  1896-97  there  were  112 
holdings  of  50,000  acres  and  over,  comprising  30  per 
cent,  of  the  total  acreage,  while  in  1908-09  there  were 
only  84  estates  of  this  class,  comprising  only  22  per  cent, 
of  the  total  acreage.  (Year-Book,  1909,  p.  443.)  The 
following  figures  as  to  acreage  show  a  considerable 
reduction  in  the  number  of  great  estates  since  1892: 
(Government  Valuation  of  Land  Department,  1907, 
B.  17A.) 


LAND  MONOPOLY  49 

No.  of  Owners 

Acres  1892  1902  1906 

10,000  and  under    20,000 148  123  129 

20,000  and  under    30,000 45  40  40 

30,000  and  under    40,000 30  21  14 

40,000  and  under    50,000 9  9  8 

50,000  and  under    75,000 14  12  8 

75,000  and  under  100,000 6  6  4 

100,000  and  under  150,000 4  2  o 

150,000  and  over 6  3  I 

Total  holding  over  100,000  acres 262  216  204 

The  new  taxes  imposed  by  the  Act  of  1907,  of  which 
the  full  amount  was  not  to  be  levied  until  1910,  will  be  a 
heavy  burden  for  the  owners  of  estates 
having  an  unimproved  value  of  £40,000  Heavy  Taxation 
and  over,  and  will  surely  compel  them  to  of  Large  Estates 
sell  or  otherwise  divide  their  holdings. 
In  fact,  a  number  of  estates  already  have  been  cut  up. 
(Parliamentary  Debates,  Vol.  147,  p.  719,  Oct.  29,  1909.) 
Naturally,  these  measures  have  been  hotly  assailed  by 
the  large  landowners.  A  newspaper  which  supported  the 
new  law  was  accused  in  its  own  columns  of  "  doing  its 
best  to  turn  a  colony  of  self-reliant,  hardworking  people 
into  a  race  of  slouching  cadgers  who  in  another  generation 
will  want  to  give  up  work  altogether  for  the  congenial 
pastime  of  filching  the  property  of  those  who  have  any- 
thing left  to  be  stolen,  if  the  latter  have  not  already  left 
the  country."  The  Hon.  Henry  Scotland  said  in  the 
Council : 

"  Sir,  this  is  a  sociaHst  bill.  I  suppose  it  is  only  the  first  of 
many  socialist  bills.  We  shall  have  plenty  of  them  by-and-by' 
until  we  shall  have  frightened  capital,  we  shall  have  induced  all 
employers  to  go  into  the  Bankruptcy  Court,  and  the  English  money 
market  will  be  closed  against  us.  .  .  With  regard  to  the  large 
landowners,  I  think  we  ought  to  bear  in  mind  that  they  have  not 
been  the  unmitigated  curse  some  people  would  make  them  out  to  be 
to  the  colony.  Who  started  the  frozen  meat  industry?  Did  those 
blethering  trades-unionists  and  socialists  start  it?  No.  It  was 
started  by  these  despised  and  persecuted  landowners."  (Parlia- 
mentary Debates,  Vol.  141,  p.  494,  Oct.  10,  1907.) 


50     STATE  SOCIALISM  IN  NEW  ZEALAND 

C.  LIMITATION   OF   AREAS 

During  the  session  of  1906  the  Government  brought 
in  a  bill  to  limit  the  holdings  in  rural  lands  of  any  individ- 
ual or  company  to  an  unimproved  value 
Proposal   to         of  £50,000.    The  bill  met  with  strong  op- 
limit   Size  .  .  ,  ,  ,    n     ii^i     T        1 

of  Holdings         position  and  wasdropped.  By    i  he  Land 

Laws  Amendment  Act,  1907  "  it  was 
made  illegal  to  acquire  from  the  Crown  any  land,  if  such 
land,  together  with  all  other  land  owned  or  occupied  by 
the  applicant  under  any  tenure,  would  exceed  5,000 
acres  of  third  class  land,  2,000  acres  of  second  class  land 
or  640  acres  of  first  class  land/  The  result  is  that  any 
land  sold  by  the  State  after  1907  will  not  be  freely  market- 
able by  the  owner.  He  cannot  sell  to  anyone  who 
would  thereby  acquire  more  than  the  area  which  he  is 
entitled  to  hold.  Very  stringent  provisions  are  inserted 
for  enforcing  compliance  with  this  law.  (Land  Laws 
Amendment,  1907,  Sections  36,  93-100.) 

There  can  be  no  question  that  the  people  as  a  whole 
approve  of  the  attempt  to  disintegrate  the  large  estates. 
The  motive  can  hardly  be  said  to  be  that  of  expropriat- 
ing the  capitalist  as  a  capitalist,  for  no  serious  agitation 
has  been  made  to  increase  the  income  tax.  The  chief 
arguments  for  the  special  taxation  of  land  are  that 
there  is  a  limited  area  and  that  a  large  part  of  it  is  held 
by  a  few  persons.  The  small  landholders  are  not  taxed 
at  all.  The  Austrian  economist,  Menger,  has  noted  that 
in  England  the  socialist  movement  directs  its  main  attack 
against  landed  property  and  concerns  itself  but  little  with 
profits  and  property  in  capital,  while  German  socialists 
see  in  movable  capital  and  interest  the  root  of  all  eco- 

'  First-class  land  is  land  of  an  unimproved  value  of  £4  an  acre  or  upwards. 
Second-class  land  is  land  worth  from  £2  to  £4  an  acre.  Third-class  land  is  land 
worth  less  than  £2  an  acre, 


LAND   MONOPOLY  51 

nomic  evil.  In  this  respect  New  Zealand  is  more  like 
England,  where  landed  property  is  concentrated  in  a 
few  hands,  and  the  people  are  determined  that  there 
shall  be  no  great  landlords,  as  in  England,  and  no 
absentee  landlords,  as  in  Ireland. 

Some  writers  have  predicted  that  the  appetite  for  re- 
form by  taxation  will  grow,  and  that  the  taxation  will  be 
increased  and  the  exemptions  diminished 

until  all  the  rent  will  be  taken  and  the  land    ^*"'*"  Farmers 

,,  r  1  f  1        Opposed  to 

practically  connscated,  accord mg  to  the    Socialism 

proposals  of  Henry  George.  But  the  land- 
less man,  when  he  becomes  a  landholder,  ceases  to  be  a 
single-taxer  and  is  strongly  opposed  to  socialism.  The 
land  legislation  of  New  Zealand,  although  apparently 
socialistic,  is  producing  results  directly  opposed  to 
socialism  by  converting  a  lot  of  dissatisfied  people  into 
stanch  upholders  of  private  ownership  of  land  and  other 
forms  of  private  property.  The  small  farmers,  then,  are 
breaking  away  from  their  former  allies,  the  working 
people  of  the  towns,  who  now  find  themselves  in  the 
minority,  but  who  are  increasing  in  numbers  and  who 
will  demand,  sooner  or  later,  a  larger  share  in  the  prod- 
uct of  industry  as  the  price  of  loyalty  to  the  capitalistic 
system. 


CHAPTER   IV 

ROADS  AND   RAILWAYS 

The  early  European  settlements  in  New  Zealand, 
like  those  in  America,  were  established  on  or  near  the 
sea-coast,  with  a  rugged  and  almost  inaccessible  back 
country,  into  which  the  settlements  extended  by  means 
of  roads.  The  numerous  rivers,  few  of  which  were  navi- 
gable, were  a  hindrance  rather  than  a  help  to  communi- 
cation, particularly  in  time  of  flood,  when  bridges  were 
carried  away,  fords  rendered  impassable,  and  even  ferries 
were  not  to  be  relied  upon.  Because  of  the  abundant  rain- 
fall, varying  from  twenty  inches  or  less  in  the  interior  of 
Canterbury  to  one  hundred  inches  or  more  in  some  parts 
of  the  West  Coast,  ordinary  unmetalled  roads  were 
quite  useless  for  wheeled  vehicles  during  many  months 
of  the  year.  People  travelled  on  foot,  on  horseback,  or 
by  bullock  sledges  that  moved  along  at  a  snail's  pace 
through  mud  and  mire.  In  remote  parts  of  the  Dominion 
these  primitive  conditions  have  continued  to  the  present 
day.  "  This  may  be  God's  own  country,"  said  a  settler 
in  one  of  the  back  blocks,  "  but  we  have  the  devil's  own 
roads." 

The  early  settlers  fully  realized  their  need  of  roads, 
and  their  leaders  sought  to  provide  funds  for  making 
them.  Edward  Gibbon  Wakefield,  the  founder  of  the 
New  Zealand  Company,  held  that  the  Company's  land 
should  be  sold  at  a  "  sufficient  "  price,  and  that  the 
revenue  therefrom  should  be  spent  on  immigration  and 
public  works,  chiefly  roads  and  bridges.  (Reeves,  State 
Experiments,    Vol.    i,    Chap.    6.)      In    the    company's 

52 


ROADS  AND   RAILWAYS  53 

settlement  at  Wellington  the  price  of  land  was  fixed  at 
£1  an  acre.  The  Canterbury  Association,  w  hich  bought 
a  large  quantity  of  land  from  the  Company,  at  first  sold  it 
to  settlers  at  £3  an  acre,  but  the  price  was  soon  reduced 
to  £2.  From  1853  to  1873  the  Province  of  Canterbury 
sold  1,101,583  acres  of  Crown  lands,  for  which  it  received 
£2,203,166,  a  large  part  of  which  was  spent  on  roads  and 
bridges.  At  first  the  making  of  roads  was  in  the  hands 
of  the  Provincial  Council,  but  in  the  year  1863  road  dis- 
tricts were  created,  governed  by  boards  elected  by  the 
rate-payers,  and  having  power  to  levy  rates  for  the 
construction  and  maintenance  of  roads.  But  the 
Provincial  Council  continued  to  spend  large  sums  of 
money  on  certain  important  works,  and  gave,  besides, 
large  grants  to  the  road  boards.  (Handbook  of  1875, 
article  by  W.  M.  Maskell.) 

The  Province  of  Otago  and  all  the  other  provinces 
adopted  a  similar  policy,  and  were  more  or  less  active  in 
the  construction  of  roads,  deriving  their 

funds  from  taxation,  as  well  as  from  the    „      , 
'        .  Roads 

sale  of  crown  lands,  but  in  the  year  1876 
the  provincial  governments  were  abolished,  and  the 
Crown  lands  were  taken  over  by  the  general  Government. 
From  this  time  the  construction  and  maintenance  of 
roads  was  chiefly  in  the  hands  of  the  road  boards,  coun- 
ties, and  other  local  governing  bodies,  but  large  subsidies 
were  granted  them  by  the  general  Government,  which 
also  carried  on  important  works  of  its  own  for  the  opening 
of  new  districts  and  the  improvement  of  those  already 
settled.  From  the  year  1870  to  March  31,  1900,  the 
sum  of  £8,331,016  was  expended  on  roads  out  of  the 
Public  Works  Fund,  and  doubtless  a  far  greater  sum  was 
spent  by  the  various  local  bodies.  (Public  Works  State- 
ment, 1909,  p.  3.)    Probably  not  less  than  £25,000,000 


54     STATE  SOCIALISM  IN  NEW  ZEALAND 

has  been  spent  upon  roads  and  bridges  from  the  begin- 
ning of  the  Colony  until  the  present  time.  A  large  part 
of  this  amount  has  been  procured  by  loans,  the  general 
Government  alone  having  borrowed  more  than  £6,000- 
000  for  this  purpose;  another  large  part  has  come  from 
the  sale  or  leasing  of  Crown  lands;  and  a  third  part, 
also  large,  has  been  derived  from  taxation.  That  the 
development  resulting  from  this  expenditure  has  many 
times  repaid  the  outlay  is  sufficiently  shown  by  the 
fact  that  the  unimproved  value  of  land  in  the  year  1909 
was  estimated  at  £172,759,948.  (Year- Book,  1909, 
P-  557-)  Whether  the  benefits  derived  from  this  expen- 
diture have  been  equitably  distributed  among  the  people 
in  different  parts  of  the  country  is  another  question. 

The  activity  of  the  provincial    governments  in  the 
building  of  roads  was  obviously  due  to  their  control  over 

the  Crown  lands,  as  well  as  to  the  fact 
Roads  and  that  the  settlers  had   not  capital  suffi- 

Land  Values         cient  for  enterprises  of  such  magnitude. 

For  the  same  reason,  when  railways  were 
projected,  the  people  naturally  expected  the  provincial 
governments  to  provide  the  money,  either  from  the 
sale  of  Crown  lands  or  from  loans  effected  in  England 
on  the  security  of  the  public  credit,  which  was  largely 
dependent  on  the  value  of  lands,  public  and  private. 
Private  companies,  perhaps,  might  have  been  formed 
if  the  provinces  had  been  willing  to  guarantee  their 
debentures  or  to  make  large  grants  of  public  land;  but 
there  was  no  large  supply  of  private  capital  in  the  colony, 
and  no  attractions  sufficient  to  induce  British  capitalists 
to  engage  in  what  must  have  seemed  to  them  small  and 
unpromising  enterprises. 

The  first  railway  in  New  Zealand  was  undertaken 
by   the    Provincial   Government   of   Canterbury   in    the 


ROADS  AND  RAILWAYS  55 

year    i860   for   the    purpose    of    connecting    the   town 

of     Christchurch     with     the     port     of 

y  ,  r  I  •  1      •,     •  J     1     Private  Capital 

Lyttelton,    irom   which    it   is   separated  ^,      .     . - 

by  a  high  range  of  hills.  At  this  time  the 
total  population  of  the  Colony,  exclusive  of  Maoris,  was 
barely  80,000,  while  the  population  of  Canterbury  was 
not  over  20,000.  The  opening  of  the  first  part  of  the  line, 
between  Christchurch  and  Ferrymead  Junction,  was  cele- 
brated with  great  rejoicing  on  December  i,  1863,  and  the 
great  tunnel,  over  a  mile  and  a  half  in  length,  was  opened 
on  December  i,  1867.  It  was  an  important  work,  con- 
necting the  capital  city  and  the  interior  of  the  Province 
with  the  magnificent  harbour  of  Lyttelton,  and  without 
it  the  development  of  the  Province  would  have  been 
retarded  for  many  years.  A  little  later  the  Province 
built  another  line,  running  southward  from  Christchurch 
to  the  Selwyn  River.  (Handbook  of  1892,  article  by 
E.  G.   Pilcher.) 

In  1863  the  Provincial  Council  of  Auckland  began 
the  construction  of  a  line  between  Auckland  and  Drury, 
chiefly  for  the  purpose  of  subduing  the  Maoris  of  the 
Waikato,  but  with  the  idea  of  ultimately  completing 
a  main  trunk  line  to  Wellington.  In  the  same  year  the 
Provincial  Council  of  Southland  (reunited  to  Otago  in 
1870),  obtained  from  Parliament  an  Act  authorizing 
(he  construction  of  the  Bluff  Harbour  and  Invercargill 
Railway,  which  was  opened  on  February  5,  1867.  To 
this  period  belongs  also  the  Dunedin  and  Port  Chalmers 
Railway,  constructed  by  private  capital  under  the  guar- 
antee of  the  Otago  Provincial  Council.  There  were  in  the 
whole  Colony  only  46  miles  of  open  railways  in  1870, 
when  Vogel's  celebrated  public  works  policy  was  pro- 
mulgated. In  1872  there  were  only  65  miles  of  provincial 
railways;    in  1875  there  were  only  70  miles  open;   and 


56     STATE  SOCIALISM  IN  NEW  ZEALAND 

when,  in  1876,  the  provincial  governments  were  abol- 
ished and  their  public  works  were  taken  over  by  the 
general  Government,  the  total  amount  spent  by  them  on 
railways,  including  the  cost  of  the  Dunedin  and  Port 
Chalmers  line,  was  estimated  at  £1,104,281,  part  of 
which  was  debt,  and  was  assumed  by  the  general  Govern- 
ment. (Handbook  of  1875,  article  by  John  Knowles; 
Year  Book  of  1908,  p.  579.) 

From  i860  to  1870  the  European  population  of  New 
Zealand  was  trebled,  having  increased  from  80,000  to 
250,000,  notwithstanding  that  there  were  almost  no 
railways.  But  people  began  to  feel  more  and  more  their 
need  in  this  regard.  The  provinces  had  made  a  good 
beginning,  but  there  was  no  prospect  of  the  rapid  growth 
of  their  railway  systems.  In  fact,  there  was  no  system 
at  all,  but  only  a  few  disconnected  spurs  issuing  from  the 
chief  towns.  There  was  a  difTerence,  too,  in  the  gauge, 
Canterbury  having  adopted  the  Irish  gauge  of  5  feet, 
6  inches;  Otago  and  Auckland  the  standard  English 
gauge  of  4  feet  8  1-2  inches;  while  the  Government,  fol- 
lowing the  advice  of  Robert  Stephenson,  recommended 
a  gauge  of  5  feet,  6  inches,  but  afterwards  adopted  3  feet, 
6  inches,  as  the  uniform  gauge  for  the  whole  Colony.  If 
the  provinces  had  gone  on  with  their  work,  it  is  probable 
that  there  would  have  been  two,  if  not  three,  different 
gauges,  with  all  the  resulting  inconvenience  and  loss  that 
Australia  has  sufTered  from  this  cause.  But  the  provinces, 
with  their  limited  resources,  could  not  command  the 
capital  necessary  for  extensive  construction.  This  was 
obviously  a  matter  for  the  general  Government  to  under- 
take. The  time  had  come  for  a  forw^ard  movement, 
and  it  was  at  this  opportune  moment  that  Mr.  (after- 
wards Sir)  Julius  Vogel,  proposed  his  remarkable  scheme 
of  colonial  development. 


ROADS  AND   RAILWAYS  57 

Although  the  population  of  the  Colony  in  1870  was 
only  250,000,  Vogel,  who  was  as  much  gambler  as 
statesman,  proposed  to  borrow  within 
the  next  ten  years  the  enormous  sum  of  Policy  of  Vogel 
£10,000,000,  to  be  expended  in  specified 
proportions  on  immigration,  railways,  roads,  pur- 
chase of  native  lands,  water  races  for  the  gold 
fields,  and  extension  of  telegraph  works,  (Handbook 
of  1875,  article  by  John  Knowles;  Handbook  of  1892, 
article  by  E.  G.  Pilcher.)  As  a  matter  of  fact,  twice  the 
proposed  amount  was  borrowed,  for  the  public  debt 
within  the  next  ten  years  increased  from  £7,841,891  to 
£28,185,711,  while  the  population  increased  from 
250,000  to  500,000,  so  that  there  was  an  increase  in  debt 
per  capita  from  £32  ($155)  to  £56  ($272). 

The  debt  would  not  have  been  so  large  if  Parliament 
had  adopted  the  whole  of  Vogel 's  plan,  for  he  suggested 
with  great  wisdom  that  the  Crown  lands  Deviations  from 
be  so  administered,  by  lease  or  sale,  as  to  Original  Plan, 
pay  a  large  part  of  the  cost  of  the  roads  through  Politi- 
and  railways,  and  that  a  special  tax  be  *^^*  Influence 
levied  on  the  owners  of  lands  specially  benefited.  (Reeves, 
New  Zealand,  in  the  Story  of  Empire  Series,  p.  144; 
Parsons,  The  Story  of  New  Zealand,  chap.  18.)  But 
provincial  and  local  influence  was  too  strong  for  Vogel. 
Parliament,  after  a  great  debate,  almost  unanimously 
agreed  to  the  alluring  proposals  involving  the  borrowing 
and  spending  of  vast  sums  of  money;  but  rejected 
measures  which  were  designed  to  operate  as  a  check  upon 
excessive  borrowing,  and  which  would  have  compelled 
the  land-owners  to  pay  part,  at  least,  of  the  burden  they 
were  so  eager  to  shift  to  the  shoulders  of  a  future  gener- 
ation. It  was  no  mere  coincidence  that  Parliament  was 
at  that  time  chiefly  composed  of  land-holders,  among 
whom  the  sheep-raisers  of  the  South  Island  exercised  a 


58      STATE  SOCIALISM  IN  NEW  ZEALAND 

dominating  inducnce.  The  Immigration  and  Public 
Works  Act  of  1870  and  cognate  Acts  were  passed,  and  the 
Colony  entered  upon  a  rapid  career  of  borrowing, 
expenditure,  and  internal  development. 

The  Government  had  a  comprehensive  plan  of 
railway  construction,  involving  the  completion  and 
extension  of  lines  already  begun,  so  as  to  make  ultimately 
two  main  trunk  lines  running  the  length  of  both  islands, 
with  feeders  into  the  interior  wherever  a  profitable  traffic 
could  be  developed.  But  the  pressure  of  local  influence 
was  so  great  as  to  compel  many  deviations  from  the 
original  plan.  In  some  districts  railways  were  built  far  in 
advance  of  requirements,  while  in  others  people  waited 
long  for  lines  that  might  have  been  immediately  profit- 
able. Sir  Julius  Vogel  desired  and  expected  the  railways 
to  pay  at  least  the  cost  of  maintenance  and  interest  on  the 
borrowed  capital  (about  5  1-2  per  cent.),  but  from  every 
part  of  the  colony  arose  a  clamour  for  a  "  fair  share  " 
in  the  public  expenditure,  and  appropriations  were 
doled  out  to  more  than  thirty  different  districts,  with 
undue  regard  to  political  infience.  (Handbook  of  1875, 
article  from  the  Nnv  Zealand  Times.)  No  doubt  the 
districts  having  the  greatest  political  influence  were,  as  a 
rule,  the  most  populous,  but  not  necessarily  the  most 
promising  or  in  greatest  need  of  development.  To  such 
perversions  of  the  original  plan  may  be  traced  much  of 
the  financial  failure  in  railway  administration  from  the 
beginning  until  the  present  time. 

The  Government  was  active  in  the  building  of  rail- 
ways from  1873  to  1877.  In  the  former  year  there  were, 
in  all,   145  miles  of  open  line  and  434 

_^^'  miles  under  construction.    In  1877  there 

Construction  .,  ^  ,.  '  , 

at  First  were  1,052  miles  01  open  hne  and  only 

251    miles  under  construction.      (Hand- 
book of   1879,  by  James  Hector,  p.   811.)     These  were 


ROADS  AND   RAILWAYS  59 

narrow-gauge  lines,  with  severe  gradients  and  sharp 
curves,  light  rails  and  cheap  bridges,  "designed  with  a 
view  to  the  early  production  of  revenue,  and  at  some 
sacrifice  of  convenience  in  travelling  and  in  working." 
Most  of  these  lines  were  built  by  contractors,  at  a  cost 
of  about  £7,000  a  mile.  (Handbook  of  1892,  article 
by  E.  G.  Pilcher.) 

The  development  of  the  Colony  which  followed  the 
inauguration  of  the  Public  Works  Policy  was  consider- 
able, though  not  so  substantial  as  many 
have  thought.  The  population  increased  Development 
by  74  per  cent,  from  1 87 1  to  1 879.  In  the  and  Inflation 
previous  eight  years  it  had  increased 
by  62  per  cent.  The  value  of  the  exports  did  not  increase 
much,  perhaps  because  of  the  world-wide  industrial  de- 
pression after  1873.  The  value  of  the  imports  increased 
at  first,  but  afterwards  fell.  There  was  a  great  excess  of 
imports  from  1872  to  1886,  due  chiefly  to  the  importation 
of  borrowed  capital,  and  after  that  year  there  was  a 
large  excess  of  exports  ("  Fifty  Years  of  Progress  in  New 
Zealand";  Year-Book  of  1909,  p.  637).  The  value  of 
land,  especially  the  lands  opened  up  by  the  railways, 
increased  enormously.    Sir  James  Hector  says: 

"  Hundreds  of  thousands  of  acres,  worth,  before  the  advent  of 
railways,  from  £i  to  £3  an  acre,  were  afterwards  sold  at  prices 
ranging  from  £10  to  £20  per  acre."     (Handbook  of  1879,  p.  80.) 

A  violent  land  fever  or  "  boom  "  ensued,  which  col- 
lapsed in  1 879,  and  from  which  the  Colony  did  not  recover 
formany  years.    Mr.  Reeves  says:  "The 
boom    burst  amid    much   suffering  and        tl     '  B    m 
repentance.       In    some   districts   three- 
fourths  of  the  prominent  colonists  were  ruined,  for  the 
price  of  agricultural  produce  continued,   on  the  whole, 
to  fall  relentlessly  year  after  year  until   1894."     (New 
Zealand,  p.   148.)      Mr.  Reeves  also  says: 


6o     STATE  SOCIALISM  IN  NEW  ZEALAND 

"  It  was  not  the  public  borrowing  of  the  Colony,  but  the  private 
debts  of  the  colonists,  which,  following  the  extraordinary'  fall  in  the 
prices  of  their  raw  products  between  1873  and  1895,  plunged  so 
many  thousands  into  disaster.  .  .  .  New  Zealand  is  now  a 
pleasant  and  highly  civilized  country.  That  she  has  become  so  in 
the  last  thirty  years  is  due  chiefly  to  the  much  criticized  public 
works  policy."    ("  New  Zealand,"  p.  150). 

While  this  is  partially  correct,  and  the  crisis  of  1879 
was  only  the  inevitable  culmination  of  a  period  of 
development  and  inflation  that  began  as  early  as  i860, 
it  is  certain  that  the  vast  and  rapid  expenditure  of 
borrowed  money  by  the  Government  acted  as  a  powerful 
stimulant  to  private  speculation  and  borrowing  at  a 
time  when  retrenchment  should  have  been  the  order  of 
the  day ;  and,  while  it  postponed  the  coming  crisis,  greatly 
increased  its  violence  when  it  did  come.  Besides,  the 
unwise  distribution  of  public  expenditure,  especially 
in  the  building  of  unprofitable  railways,  tended  to  limit 
the  power  to  borrow  later  on  for  profitable  investments, 
and  thus  retarded  the  development  of  the  country. 

In  the  four  years  from  1873  to  1877,  907  miles  of 
railway  were  completed,  making  an  average  of  251  miles 
a  year.  In  the  ten  years  following,  701  miles  were  built; 
in  the  next  ten  years  only  304  miles;  and  in  the  ten 
years  ending  March  3,  1908,  only  416  miles  were  com- 
pleted ;  not  because  the  Colony  had  all  the  needed  rail- 
ways, nor  because  none  of  the  projected  lines  were  likely 
to  pay,  but  chiefly  because  of  the  inability  of  the  Govern- 
ment to  borrow  adequate  sums;  and  this  may  be  traced 
to  the  unprofitable  character  of  the  lines  already  built. 

The  activity  of  the  Government  in  railway  construc- 
tion, and  the  unwillingness  of  the  people  to  give  conces- 
sions to  private  syndicates,  effectually 
Private  pre\"ented  private  capital  from  engaging 

Railways  in  railway  enterprises.     The  Wellington 

and  Manawatu  Railway  Company  is  a 
notable    exception  to  this  rule.     In  the  year  1878  the 


ROADS  AND  RAILWAYS  6i 

Grey  Government,  after  careful  surveys,  decided  to  build 
a  line  between  Wellington  and  Foxton,  as  an  important 
part  of  the  line  between  Wellington  and  New  Plymouth 
on  the  way  to  Auckland.  After  about  £30,000  had  been 
spent,  the  work  was  discontinued,  and  a  royal  commission 
in  1880  reported  against  the  line.  Thereupon  some  en- 
terprising citizens  of  Wellington  took  the  matter  up,  and, 
being  assured  by  the  premier  that  the  Government  had 
no  money  to  carry  on  the  work,  but  would  grant  con- 
cessions, they  formed  a  company  in  1881 .  The  work  was 
vigorously  prosecuted,  and  the  line  between  Wellington 
and  Longburn,  84  1-4  miles  in  length,  was  opened  on 
December  3,  1886.  By  "The  Railways  Construction 
Act,  1881,"  Parliament  made  a  grant  of  land  to  the 
company  to  the  extent  of  30  per  cent,  of  the  cost  of 
construction,  provided  that  this  cost  did  not  exceed 
£5,000  per  mile.  The  value  of  land  receivable  under  this 
contract  amounted  to  £126,375.  Through  neglect  of  the 
Government  the  company  received  land  of  the  value  of 
only  £101, 909 — about  215,000  acres.  (Annual  Report 
of  the  Wellington  and  Manawatu  Railway  Company, 
1906;  Year-Book,  1905,  pp.  381-384.) 

The  Wellington  and  Manawatu  Railway  Company 
has  been  very  successful.  It  opened  up  a  fine  pastoral 
country   tributary   to   Wellington,    and 

sold  its  lands  at  good  prices.     It  gave     Success  of 

^,     ^  J     ,  ,  ,         the  Manawatu 

a    service    that    compared    favourably     Railway 

with  that  of  the  Government,  and  at 
the  same  rates.  It  diverted  a  good  deal  of  trafific  from 
the  Government's  line,  which  reached  Wellington  by  a 
detour  of  134  miles  in  place  of  84  miles  by  the  Manawatu. 
In  fact,  the  Government's  express  trains  between  Well- 
ington and  New  Plymouth  were  obliged  to  pass  over  the 
Manawatu  line.    From  the  beginning  the  company  paid 


62      STATE  SOCIALISM  IN  NEW  ZEALAND 

interest  at  5  per  cent,  on  its  debentures.  The  first 
dividend,  of  3  1-2  per  cent.,  was  paid  in  1891.  For  the 
two  succeeding  years  5  per  cent,  was  paid,  after  which 
the  dividend  was  6  per  cent.,  and  latterly  7  per  cent. 
The  company  also  paid  for  all  additions  and  improve- 
ments out  of  revenue,  and  up  to  1906  had  written  off  the 
sum  of  £202,086  on  account  of  railway  and  rolling  stock. 
From  the  beginning  until  the  year  1906  the  company  had 
paid  £118,550  in  general  and  local  taxes,  being  nearly 
20  per  cent,  more  than  the  original  value  of  the  land 
grant.  The  value  of  governmental  and  private  lands 
in  the  district  served  by  the  railway  has  greatly  increased, 
and  the  company  claimed  to  have  been  the  chief  cause 
of  the  creation  of  this  "  unearned  increment." 

For  a  long  time  the  Manawatu  Railway  was  a  thorn 
in  the  flesh  to  the  Railways  Department,  and  the  Govern- 
ment was  incessantly  urged  to  purchase  the  line,  in 
accordance  with  the  provisions  of  the  Act  of  1881 ,  and  so 
complete  the  railway  system.  This  was  done  on  Decem- 
ber 7,  1908,  the  price  being  £933,759.  (Year-Book,  1909, 
p.  581.)  This  was  enough  to  pay  off  the  debentures  and 
to  give  the  shareholders  more  than  the  market  value  of 
their  shares  (485.)  at  the  time  of  the  sale.  On  March 
13,  1909,  it  was  announced  that  they  would  probably 
receive  60s.  per  share.  The  venture  proved  a  good  in- 
vestment for  the  shareholders  and  the  Government  ex- 
pects to  make  a  profit  on  the  transaction. 

The  only  other  private  railway  of  any  importance  was 
the  New  Zealand  Midland  Railway,  owned  by  an  English 

Syndicate  formed  in  1886  for  the  purpose 
The  Midland  of  building  a  line  from  Springfield  in 
Railway  Canterbury  to  Brunnerton  in  Westland, 

by  way  of  the  Otira  Gorge,  and  thence 
to  Nelson,  a  total  distance  of  235  miles,  to  complete  the 


ROADS  AND   RAILWAYS  63 

main  trunk  line  of  the  South  Island.  It  was  a  land- 
grant  railway,  and  under  the  contract  of  1888  the  com- 
pany was  to  receive  105.  worth  of  land  for  every  £1  spent 
in  construction.  It  is  stated  that  the  Government  did 
not  abide  by  its  contract,  but  forced  the  company  to  sell 
upon  unfair  terms.  The  railway  was  taken  over  by  the 
Government  on  May  27,  1895,  after  79  miles  had  been 
constructed  at  a  cost  of  about  £1,300,000.  (Year-Book 
of  1894,  article  by  H.  M.  Dalston,  acting  general  man- 
ager; Year-Book  of  1896,  p.  381.)  The  Government 
has  not  yet  completed  the  line  as  originally  planned,  so 
that  Nelson  and  Westland  are  still  isolated,  having  no 
railway  connection  with  the  main  line  of  the  South  Island. 
On  March  31,  1909,  there  were  29  miles  of  private  rail- 
ways in  New  Zealand,  while  2,682  miles  were  owned  and 
operated  by  the  Government.  (Railways  Statement, 
1909.) 

Comparisons  of  railways  in  different  countries  are 
interesting,  but  often  misleading.  New  Zealand  has  2.4 
miles  of  railway  for  every  100  square 

miles  of  territory;     New  South  Wales,  general 

.,,,..  -1  /^  Description  and 

I.I  miles;  Victoria,  3.8  miles;  Queens- Comparisons 
land,  ,47  miles;  Argentina,  i.i  miles; 
Canada,  .6  mile;  the  United  States,  7.7  miles;  Nebraska, 
7.7  miles;  Colorado,  5.1  miles.  New  Zealand  is  better 
supplied  with  transportation  facilities  than  these  figures 
indicate,  for  most  of  the  large  towns  are  on  the  coast,  and 
have  the  benefit  of  transportation  by  sea.  No  part  of 
New  Zealand  is  as  much  as  100  miles  from  the  sea, 
so  that  places  that  have  no  railways  at  all,  but  have 
fairly  good  roads,  are  not  altogether  isolated. 

On  the  whole,  railway  development  has  followed  a 
pretty  well-defined  plan,  and  there  are  no  parallel  lines. 
.The  Main  trunk  line,  between  Auckland  and  Wellington, 


64     STATE  SOCIALISM  IN  NEW  ZEALAND 

after  }'cars  of  delay,  has  been  completed,  and  was  for- 
mally opened  on  November  6,  1908.  The  main  line  of 
the  South  Island  is  still  far  from  completion.  Travellers 
southward  bound  from  Wellington  take  ship  to  Lyttelton, 
a  distance  of  175  miles,  whence  they  go  by  rail,  fol- 
lowing closely  the  coast  line,  to  the  Bluff,  at  the  southern 
end  of  the  island.  There  are  still  a  number  of  isolated 
bits  of  line,  beginning  at  some  seaport  and  ending  at 
some  small  country  station.  Spurs  run  out  at  intervals 
from  the  main  line,  sometimes  into  a  rich  and  populous 
district,  sometimes  into  a  thinly  settled  pastoral  country, 
where  little  traffic  can  be  developed. 

The  narrow  gauge  of  3  feet,  6  inches,  prevails  through- 
out. Originally,  the  railways  were  built  with  sharp 
curves,  steep  grades,  light  thirty  or  forty  pound  rails, 
little  or  no  ballasting,  temporary  bridges,  small-sized 
rolling  stock,  and  very  inadequate  terminal  facilities. 
Gradually,  the  system  has  been  improved,  and  at  con- 
siderable expense.  The  railway  stations  at  Auckland 
and  Wellington  are  still  very  poor,  but  Christchurch 
has  a  good  building,  and  the  new  station  at  Dunedin, 
costing  about  £46,000,  is  excellent.  The  first  class  car- 
riages compare  favorably  with  cars  of  the  same  class  in 
the  United  States.  Second  class  accommodation  is  poor. 
In  winter  the  carriages  are  partially  heated  by  warming- 
pans,  except  on  the  main  trunk  line,  where  heating  by 
steam  has  been  introduced.  Until  recently  there  were  no 
night  trains,  and,  therefore,  no  sleeping-cars;  but,  since 
the  opening  of  the  main  trunk  line,  sleeping  accommoda- 
tion has  been  provided  between  Auckland  and  Welling- 
ton. There  are  dining  cars  on  the  principal  trains,  where 
one  can  obtain  a  good  meal  for  25. 

On  most  of  the  branch  lines  the  service  is  infrequent, 
seldom  exceeding  one  train  a  day  each  w'ay.    There  are 


ROADS  AND   RAILWAYS  65 

two  trains  a  day  each  way  between  Christchurch  and 
Dunedin.  For  shorter  distances,  on  the  main  lines,  the 
service  is  more  freqaent.  The  large  towns  have  as  good 
suburban  service  as  could  be  expected,  considering  their 
size.  The  speed  of  trains  is  not  great,  particularly  in 
hilly  districts.  Ordinary  trains  travel  from  ten  to  seven- 
teen miles  an  hour;  express  trains,  from  seventeen 
to  twenty-five  an  hour.  The  trains  are  generally  on 
time.  Accidents  are  relatively  fewer  than  in  the  United 
States. 

Passenger  trafhc  is  relatively  large  in  New  Zealand 
yielding  33  per  cent,  of  the  total  revenue  as  compared 
with  22  per  cent,  in  the  United  States. 

It  is  difficult  to  make  a  comparison  of      ^^^l^."^*'"  . 
,  r        ,  .,,,..  Traffic  and 

tares,  lor  there  are  no  available  statistics      pares 

giving  the  average  revenue  per  passenger- 
mile.  Ordinary  first-class  fares  average  about  i  i-2d. 
(3  cents)  per  mile,  and  second-class  fares  about  id. 
(2  cents),  and  they  are  the  same  in  every  part  of  the 
system.  The  fares  for  return  tickets  are  usually  double 
those  for  single  tickets.  About  80  per  cent,  of  the 
passengers  travel  second-class.  There  are  special  excur- 
sion fares  for  schools,  factories,  and  friendly  societies, 
season  tickets  for  suburban  residents  and  school-children, 
weekly  workmen's  tickets,  special  rates  for  tourists,  and 
minor  concessions,  all  of  which  tend  to  reduce  the  average 
fare.  It  seems  probable  that  the  average  fare  per  pas- 
senger-mile is  slightly  under  id.  (2  cents),  and,  therefore, 
very  close  to  the  average  of  the  United  States  (2.014 
cents).  (Statistics  of  Railways  in  the  United  States, 
1907;  Passenger  Fares  and  Coaching  and  Goods  Rates, 
Wellington,    1907.) 

The  railways  statement  does  not  give  the  average 
charge  per  ton-mile;  but,  judging  from  the  commodity 


66     STATE  SOCIALISPvI   IN  NEW  ZEALAND 

rates,  it  is  safe  to  say  that  it  is  not  much   less  than  2d' 
(4  cents),  and  certainly  not  less  than  i.^^d.     (3.5  cents). 

The  ton,  however,  is  the  long  ton  of 
Freight  Charges  2,240  pounds.       In   the   United   States, 

in  the  year  1906-07,  the  average 
revenue  per  ton  of  freight  per  mile  was  .7 59  cent.  (.379d.). 
The  system  of  tapering  rates,  involving  progressively 
lower  rates  for  increasing  distances,  is  applied  through- 
out. Goods  in  Class  F,  when  shipped  by  the  truck-load, 
are  carried  at  the  lowest  classified  rates,  at  a  charge  of 
.72c?.  (i  .44  cents)  per  ton-mile  for  a  distance  of  100  miles, 
and  .94c?.  (1.98  cents)  per  ton-mile  for  a  distance  of  50 
miles.  Lime  for  fertilizing,  under  specified  conditions,  is 
carried  free  for  a  distance  of  100  miles,  but  forms  an 
insignificant  part  of  the  total  freight.  Goods  in  Class 
A,  including  furniture,  sewing-machines,  fancy  goods, 
dried  fruit,  glassware,  spirits,  sugar,  and  a  great  variety 
of  articles  of  general  merchandize,  are  carried  50  miles 
at  a  rate  of  'J.^6d.  (15.12  cents).  To  these  rates  must 
be  added  extra  charges,  when  loading  and  unloading  are 
done  by  the  Department.  It  should  be  noted  also  that 
most  of  the  freight  is  shipped  at  the  owner's  risk. 

The  average  length  of  haul  is  probably  only  slightly 
over  40  miles  and  this  is  one  of  the  chief  reasons  why 
freight  rates  are  so  high,  and  why  it  is  not  quite  fair  to 
compare  tlicm  with  average  rates  in  the  United  States, 
which  are  brought  down  by  low  charges  on  long-distance 
shipments  of  grain,  cattle,  cotton,  coal,  lumber,  fruit, 
and  other  staple  commodities.  Besides,  the  volume  of 
business  is  less  in  New  Zealand,  so  that  the  average  cost 
per  ton  of  freight  carried  is  relatively  high. 

As  a  rule,  both  freight  and  passenger  rates  are  uniform 
throughout  the  Dominion,  irrespective  of  the  density  of 
traffic.     The   Railways  Department  is  no  respector  of 


ROADS  AND  RAILWAYS  67 

persons  or  places.    The  rates  on  small,  disconnected  lines 
are  the  same  as  those  on  the  main  lines,  and  the  small- 
est wayside  station  pays  no  more  than 
the  largest  city.     Beyond  the  published    n^^^*?*'^"^;^ 
rates  for  carload  lots,  as  in  Class  F,  the    ^j^^^^  .^^  Rates 
largest  shippers  get  no  advantage,  and 
there  are  no  secret  discriminations.    Doubtless  a  system  of 
differential  rating  designed  to  favour  populous  districts 
would  prove  profitable,  but  it  would  cause  more  discus- 
sion and  criticism  than  any  administration  could  stand. 
While  making  some  special  concessions  to  certain  local- 
ities and  for  the  benefit  of  certain  industries,  as  timber 
and  coal,  the  Department,  for  the  most  part,  has  taken 
refuge  in  an  almost  inflexible  system  of  rates,  and,  instead 
of  modifying  the  rates  in  accordance  with  the  conditions 
and  changes  of  business,  has  compelled  business  to  ac- 
commodate itself  to  the  established  rates,  regardless  of 
special  circumstances  and  special  needs. 


CHAPTER  V 

RAILWAY  FINANCE 

After  the  inauguration    of    the    Immigration   and 
PubHc  Works  Policy  of  1870,  the  colonial  secretary  acted 

for  a  time  as  minister  of  immigration 
Railway  and  public  works.    Later  a  special  minis- 

Administration    ter   was   appointed,    and    in    1872    two 

departments  were  created,  and  the  State 
railways  were  placed  under  the  control  of  the  minister  of 
public  works.  (Handbook  of  1875,  article  by  John 
Knowles.)  From  the  beginning  the  railways  were  run  at 
a  loss,  and  there  was  much  criticism  of  their  administra- 
tion. Hence,  by  the  Government  Railways  Act,  1887, 
they  were  placed  in  the  hands  of  a  board  of  commis- 
sioners, three  in  number,  appointed  for  five  years  or 
during  good  behaviour,  who  were  expected  to  introduce 
business  methods  and  to  extinguish  the  deficit. 

The  commissioners  had   control  from  January  28, 
1889,  to  December  31,  1894,  during  a  time  of  industrial 

depression,  and  succeeded  fairly  well  in 
The  Railway  their  attempt  to  place  the  railways 
Commission         upon    a    sound    financial    basis.      They 

made  themselves  to  a  large  extent  inde- 
pendent of  politics,  practised  unpopular  economies, 
refused  demands  for  concessions  on  every  hand,  and  made 
so  many  enemies  that,  after  six  years  of  struggle,  the 
clamour  against  them  was  so  great  that  the  commission 
was  abolished.  It  is  the  common  belief  to  this  day, 
quite  contrary  to  fact,  that  their  administration  was  an 
egregious  failure.     Their  greatest  virtues  were,  in  the 

68 


RAILWAY  FINANCE  69 

public  mind,  their  most  heinous  crimes.  They  were 
accused  of  being  irresponsible  and  despotic,  of  caring 
only  for  their  salaries,  charging  exorbitant  rates  in  some 
cases,  and  in  others  competing  unfairly  with  steamship 
companies,  tram-cars  and  coaches,  of  opposing  reform  in 
administration,  and,  in  general,  of  being  out  of  touch  with 
the  people  and  disinclined  to  foster  industry  and  encour- 
age internal  development.  Another  reason  that  has  been 
given  to  explain  why  the  commission  was  abolished  is 
that  the  Government  wanted  the  patronage  which  the 
railways  provided. 

The  proposal  to  abolish  the  commission  was  made 
an  issue  in  the  election  of  1893,  and  after  the  return  to 
power  of  the  Seddon  Government  the  Government  Rail- 
ways Act,  1894,  was  passed.  It  placed  the  railways  in  the 
hands  of  the  Railways  Department,  now  separate  from 
the  Public  Works  Department,  and  this  form  of  adminis- 
tration has  continued  until  the  present  timic. 

The  Public  Works  Department  builds  the  railways; 
the  Railways  Department  operates  them.  The  Rail- 
ways Department  is  doubtless  in  closer  touch  with  the 
public  than  the  commissioners  were  or  desired  to  be. 
The  immediate  control  is  in  the  hands  of  the  general 
manager,  but  the  power  and  responsibility  belong  to  the 
minister,  who  is  a  member  of  the  cabinet  and  has  a  seat 
in  Parliament. 

Since  the  year  1894-95,  only  478  miles  of  line 
have  been  constructed,  but  much  has  been  done  in 
the  way  of  improving  existing  lines  by  strengthen- 
ing the  road-bed;  ballasting;  building 
stronger  bridges;  laying  heavier  rails;  Improvements 
adding  more  powerful  engines  and  larger 
rolling  stock,  with  Westinghouse  brakes  and  other 
improvements;   erecting  new  station  buildings;   double- 


70     STATE  SOCIALISM  IN  NEW  ZEALAND 

tracking  certain  lines;  introducing  signals  and  inter- 
locking systems,  together  with  minor  improvements  and 
additions.  Most  of  these  improvements  have  been 
made  with  borrowed  money,  since  the  net  revenues  have 
not  been  sufficient  to  pay  even  interest  on  the  capital  cost. 
The  money  for  such  improvements  must  either  be  bor- 
rowed or  paid  out  of  taxes,  for  the  improvements  are 
required  to  keep  pace  with  the  development  of  the  rail- 
way business. 

The  vexed  question  as  to  charging  "  additions  to 
open  lines  "  to  capital  or  to  revenue  is  a  question  of 

correct  accounting.  If  the  maintenance 
Additions  to  account  is  sufificiently  large,  so  as  to 
Open  Lines  provide    against    depreciation,    and     if 

the  improvements  involve  real  additions 
to  capital  value,  there  can  be  no  doubt  that  they  may  be 
properly  charged  to  capital.  It  is  stated  that  the  Depart- 
ment is  particular  about  this  matter,  and  when,  for  exam- 
ple, a  new  station  replaces  an  old  one,  the  cost  of  replacing 
the  station  as  it  was  before  is  charged  to  maintenance, 
while  the  additional  cost  of  a  better  building  is  charged 
to  capital.  On  the  other  hand,  the  entire  cost  of  new 
rails  is  charged  to  revenue.  Most  of  the  money,  how- 
ever, is  spent  for  new  rolling-stock.  As  old  rolling-stock 
is  discarded,  it  is  written  off  and  replaced  out  of  revenue. 
A  committee  appointed  by  the  Auckland  Chamber  of 
Commerce  to  investigate  this  matter  reported  as  follows: 

"  We  are  of  opinion  that  a  very  substantial  amount  of  such 
additions  should  be  placed  to  capital  account."  {The  Herald, 
Auckland,  February  14,  1908;  H.  G.  Stockwell,  "  Depreciation, 
Renewal  and  Replacement  Accounts,"  a  paper  read  before  the 
American    Association    of    Public    Accountants,    October,     1909.) 

There  was  no  account  of  additions  to  open  lines  under 
the  commissioners. 


RAILWAY  FINANCE  71 

Another  argument  in  favour  of  charging  to  capital  the 
cost  of  improvements  is  that  it  is  desirable  to  show  in  the 
accounts  the  exact  capital  cost  of  the  railways,  which 
would  not  be  done  if  expenditures  beyond  a  reasonable 
maintenance  were  charged  to  re\enue.  Had  additions 
to  open  lines  since  1895  been  charged  to  revenue,  the 
capital  cost  of  the  open  lines  would  now  appear  to  be 
something  like  £23,000,000  instead  of  £27,000,000,  and 
the  Department  would  seem  to  be  earning  a  higher  per 
cent,  of  net  revenue  than  it  actually  earns.  In  fact, 
the  sum  of  £27,762,592,  given  in  the  accounts,  is  not 
the  full  cost  of  the  railway  system  to  the  people  of  New 
Zealand.  To  this  should  be  added  £1,289,840,  the  cost 
of  lines  not  yet  (March  31,  1909)  open,  making  £29,052,- 
432  as  the  total  capital  cost  upon  which  interest  should 
be  reckoned. 

But  the  railways  have  cost  even  more  than  this. 
Since  the  beginning  there  has  always  been  a  large  sum 
invested  in  unopened  lines,  upon  which 
interest  has  had  to  be  paid,  and  this  Total  Cost  of 
must  have  amounted  to  several  millions  the  Railways 
of  pounds  in  the  past  thirty-nine  years. 
There  should  also  be  added  the  yearly  deficits,  amounting 
to  £4,500,000  since  1882,  and  an  unknown  sum  before 
that  time.  If  the  total  capital  expenditure  were  reckoned 
from  1870  to  the  present  time,  it  would  be  seen  that  New 
Zealand  has  actually  paid  for  her  railway  system  not  far 
from  £40,000,000  ($200,000,000).  Of  this  amount  only 
£23,305,009  was  paid  out  of  borrowed  money,  and  forms 
part  of  the  public  debt.  The  additional  cost  has  been 
paid  from  other  sources,  partly  from  land  sales,  but 
chiefly  from  taxes,  direct  and  indirect.  (Railways 
Statement,  1909;  Year-Book,  1909,  p.  605.) 

Since  the  year  1895  the  capital  cost  has  increased 


72     STATE  SOCIALISM  IN  NEW  ZEALAND 

from  £7,703  to  £10,351  ($50,000)  per  mile  of  open  line, 
largely  because  of  the  improvements 
High  Cost  per  above  mentioned,  but  also  because  of 
Mile  of  Line  the  more  difficult  construction  and  su- 
perior character  of  the  new  lines,  par- 
ticularly the  recently  completed  main  trunk  line.  This 
cost  seems  high  for  a  narrow  gauge  road,  but  it  should 
be  remembered  that  the  New  Zealand  railways,  particu- 
larly the  newer  lines,  frequently  run  through  a  difficult 
country,  where  the  cost  of  construction  is  necessarily  high. 
Also,  railway  construction  is  conducted  on  a  small  scale, 
a  little  at  a  time,  and  materials  are  expensive  because  of 
remoteness  from  the  industrial  centres  of  the  w^orld. 
Again,  the  Department  of  Public  Works  assists  the  De- 
partment of  Labour  in  finding  work  for  the  unemployed, 
especially  in  the  winter  months,  and  a  large  part  of  the 
work  is  done  by  labourers  working  in  co-operative  gangs, 
generally  with  pick  and  shovel  instead  of  modern  ma- 
chinery for  excavating  and  grading.  Such  facts  as  these 
largely  explain  the  high  cost  of  construction.  Doubtless 
another  reason  is  that  the  work  is  done  by  a  govern- 
mental department  and  not  by  private  contractors. 

Because  of  the  general  prosperity  of  the  country,  to 
which,  of  course,  the  railways  have  contributed,  the 
gross  earnings  of  the  system  have  increased  from  £1,150,- 
851  in  1895  to  £2,929,526  in  1908-09.  But  the  expendi- 
ture has  increased  in  still  greater  proportion,  from  £732,- 
160  in  1894-95  to  £2,114,815  in  1908-09,  and  had  it  not 
been  for  a  fall  in  the  rate  of  interest  on  Government 
loans,  the  deficit  for  1909,  figured  on  the  basis  of  the 
"  capital  cost "  of  the  open  lines,  would  have  been 
£323,555,  instead  of  £212,468,  as  it  was. 

The  Railways  Statement,  presented  annually  to 
Parliament  by  the  minister  of  railwa3's,  does  not  recog- 


RAILWAY  FINANCE  73 

nize  the  existence  of  a  deficit,  but  shows  a  "net 
profit  on  working,"  so  called,  with- 
out noting  that  it  is  always  insufficient  Deficits 
to  pay  interest  on  the  cost  of  construc- 
tion at  the  average  rate  of  interest  paid  by  the  Govern- 
ment on  the  public  debt.  In  the  year  ending  March  31, 
1909,  the  railways  earned  a  "  net  profit  "  of  2.93  per  cent, 
on  £27,762,592,  the  cost  of  construction  of  the  open 
lines,  but,  since  the  average  rate  of  interest  paid  on  the 
public  debt  was  about  3.7  per  cent.,  the  "  net  profit"  is 
absorbed  in  interest  payments,  and  a  deficit  emerges, 
amounting  to  £212,468  ($1,000,000),  if  interest  is  reck- 
oned on  the  cost  of  the  open  lines  only.  But  the  real  cost 
of  construction,  on  which  interest  should  be  reckoned, 
includes  the  cost  of  the  unopened  lines,  making  a  total 
of  £29,052,432,  reducing  the  "  net  profit  "  to  2.80  per 
cent.,  and  increasing  the  deficit  to  £262,760.  This  is 
about  the  same  as  the  deficits  during  the  administration 
of  the  commissioners,  but  if  interest  were  reckoned  at 
the  rate  prevailing  In  their  time,  the  deficit  would  be 
much  greater.  Reckoning  interest  on  the  cost  of  the  open 
lines  only,  as  in  the  table,  the  total  deficit  from  1882  to 
1909  is,  in  round  numbers,  £4,500,000  ($21,800,000). 
(Railways  Statement,  1909,  Return  No.  16.)^ 

In  explanation  of  the  deficit  it  should  be  said  that 
some  of  the  lines,  chiefly  those  in  the  North  Island,  earn 
more  than  3.7  per  cent,  upon  the  capital 
cost,  and   that  the  bulk  of  the  deficit       Losses  chiefly 
,      .  ,  ,       TT  .111  the  South 

proceeds   from   losses  on   the   Hurunui-       island 

Bluff   section,  the   main    trunk   line   of 
the  South  Island,  1,299  miles  in  length,  of  which  the  net 
earnings  in  1908-09  were  only  2.32  per  cent.    This  is  the 
oldest  part  of  the  system,  being  the  continuation  and 
linking  up  of  lines  begun  by  the  provinces  of  Canterbury 

'  See  table,  foot  of  pp.  74-75. 


74     STATE  SOCIALISM   IN  NEW  ZEALAND 


and  Otago.  It  is  probable  that  the  poHtical  influence  of 
the  South  Island,  greater  formerly  than  at  present,  had 
much  to  do  with  unprofitable  railway  construction  in  that 
part  of  New  Zealand.  The  Westport  section,  a  coal  road 
31  miles  in  length,  is  the  most  profitable  of  all,  earning 
11.85  pei"  cent,  on  its  capital  cost  but  contributing  little 
to  the  gross  earnings  of  the  system.  The  Nelson  and 
the  Picton  sections,  48  and  34  miles  in  length,  earn  less 


Miles 
Open. 

Capital  Cost 
of  Open 
Lines. 1 

Average 
Rate  of 
Interest 
on  Pub- 
lic Debt.2 

Interest 

on  Capital 

Cost. 

Gross  Earnings. 

Year. 

Amount. 

Earnings 
Per  Train- 
Mile. 

1881-82... 
1882-83... 
1883-84... 
1884-85... 
1885-86... 
1886-87... 
1887-88... 
1888-89... 
1889-90... 
1890-91... 
1891-92... 
1892-93... 
1893-94... 
1894-95... 
1895-96... 
1896-97... 
1897-98... 
1898-99... 
1899-1900 
1900-01... 
1901-02... 
1902-03... 
1903-04... 
1904-05... 
1905-06... 
1906-07... 
1907-08... 
1908-09... 

1319 
1358 
1396 

1477 
1613 
1727 
1758 
1777 
1809 
1842 
18  (Jit 
1886 
1948 
1993 
2014 
2018 
2055 
2090 
2104 
2212 
2235 
2291 
2328 
2374 
2406 
2456 
2471 
2682 

£9,443,000 
10,478,998 
11,078,500 
11,819,194 
12,427,814 
13,017,567 
13,352,978 
13,472,837 
13,899,955 
14,278,586 
14,656,691 
14,733,120 
15,137,036 
15,352,613 
15,425,532 
15,577,392 
15,993,903 
16,404,076 
16,7(J3,887 
17,207,328 
18,170,722 
19,081,735 
20,692,911 
21,701.572 
22,498,972 
23,504,272 
24,365,647 
27,762,592 

4.8* 

4.8 

4.8 

4.7 

4.7 

4.7 

4.6 

4.6 

4.6 

4.5 

4.6 

4.3 

4.4 

4.1 

3.9 

3.9 

3.9 

3.8 

3.8 

3.8 

3.8 

3.8 

3.8 

3.7 

3.8 

3.7 

3.7 

3.7 

£453,264 
492,991 
631,768 
555,079 
584,107 
611,825 
614,236 
619,740 
623,397 
642,536 
674,207 
633,524 
666,029 
629,459 
599,795 
608,518 
623,762 
623.355 
634,847 
653.878 
690,487 
706,022 
787,130 
804,958 
854,960 
869,658 
901,528 

1,027,179 

£892,026 
953,347 
961,304 
1,045,712 
1,047,419 
998,768 
994,843 
997,615 
1 ,095,570 
1,121,701 
1,115,432 
1,181,522 
1,172,793 
1,150,851 
1,183,041 
1,286,158 
1,376,008 
1,469,665 
1,623,891 
1,727,236 
1,874,586 
1,974,038 
2,180,641 
2,209,231 
2,349,7(14 
2,624,(J(H) 
2,761,938 
2,929,526 

85.50d 

82.00 

81.00 

87.00 

83.00 

79.60 

81.00 

85.50 

91.50 

93.00 

88.75 

94.50 

90.25 

85.75 

85.75 

90.50 

90.00 

89.00 

93.00 

89.75 

88.95 

87.00 

91.75 

86.50 

87.75 

93.00 

93.75 

94.00 

1  If  interest  were  reckoned  on  the  capital  cost  of  open  and  unopened 
lines,  as  it  should  be,  the  annual  deficits  would  be  much  greater  than  the 
amount  shown  in  the  table.  For  the  year  1908-09  the  capital  cost  of  open 
and  unopened  lines  was  £29,052,432. 

*The  average  rate  of  interest  on  the  public  debt  is  less  than  the  rate 
actually  paid  on  the  sums  realized  by  the  government  from  the  sale  of 
stock.  'At  the  present  time  4  per  cent,  stock  is  floated  at  about  par,  and 
therefore  it  would  be  more  correct  to  take  4  per  cent,  as  the  rate  of  inter- 
est on  the  railway  debt.  Reckoning  interest  at  4  per  cent,  on  the  cost  of 
open  and  unopened  lines  the  deficit  for  1908-09  would  be  £347,386,  and 


RAILWAY  FINANCE 


75 


than  one  per  cent,  on  the  capital  cost,  while  the  Kawa- 
kawa  section,  only  8  miles  in  length,  earns  less  than  its 
running  expenses.  (Railways  Statement,  1909,  returns 
No.  4  and  6.) 

Sir  Joseph  Ward  in  a  recent  speech  in  Parliament, 
thus  explained  the  losses  on  the  railway  systern  of  the 
South   Island: 


"  Net  Profits  on 

Expenditure. 

Work 

lUg." 

Year. 

Per 

Per  Cent. 

Percent. 

Deficit. 

Amount. 

Train- 
mile. 

of 
Revenue. 

Amount. 

of  Capi- 
tal Cost. 

1881-82... 

£523,099 

50d 

58?{ 

£368.927 

3.95J 

£84,337 

1882-83... 

592,821 

51 

62 

360,526 

3.4 

132,465 

1883-84... 

65.",, 990 

55 

68 

305,314 

2.7 

226,454 

1884-85... 

()!»(). 026 

57 

66 

355,686 

3.0 

1 99,393 

1885-86... 

69(t,340 

54 

66 

357,079 

2.9 

227,028 

1886-87... 

6;  Ml, 072 

66 

70 

299,696 

2.3 

312,129 

1887-88... 

<;,S7,328 

56 

69 

307,515 

2.3 

306,721 

1888-89... 

647,045 

55 

65 

350,570 

2.6 

312,170 

1889-90... 

6S2,7.S7 

57 

62 

412,783 

2.9 

210,614 

1890-91... 

7()(l,7()3 

58 

62 

420,998 

2.9 

221,538 

1891-92... 

706,517 

66 

63 

408,915 

2.8 

265,292 

1892-93... 

7.!4,]42 

59 

62 

449.380 

3.0 

184,044 

1893-94... 

735. 359 

57 

63 

437,434 

2.9 

228,595 

1894-95... 

7;i2,l(;() 

55 

66 

418,691 

2.7 

210,768 

1895-96... 

751,368 

55 

64 

431,673 

28 

168,122 

1896-97... 

7S'.i,i^54 

56 

61 

497,101 

3.2 

111,417 

1897-98... 

,S57,191 

56 

62 

618.817 

3.2 

104,945 

1898-99... 

929,738 

56 

<;3 

539,927 

3.2 

84,428 

1899-1900 

1,052,358 

60 

65 

571,.533 

3.4 

63.314 

1900-01... 

1,127,848 

59 

65 

599,388 

3.5 

65,490 

1901-02... 

1,250.237 

59 

67 

622.349 

3.4 

66,138 

1902-03... 

1,343,415 

59 

68 

630,623 

3.3 

75,399 

1903  04... 

1,438,724 

60 

66 

741,917 

3.6 

45,213 

1904-05... 

1.492,900 

58 

68 

716.331 

3  3 

86,627 

1905-06... 

1  ,621 ,239 

60 

69 

728,465 

3.2 

126,495 

1906-07... 

1,812,482 

<;4 

69 

812,118 

3.4 

57,540 

1907-08... 

1 ,949,759 

66 

71 

812,179 

3.3 

89,349 

1908-09... 

2,114,815 

68 

72 

814,711 

2.9* 

212,468 

£4,468,593 

the  total  deficit  since  1881-82  would  probably  be  at  least  £8,000,000  and 
possibly  £10,000,000. 

3  The  Railways  Statement  for  1909-10  is  not  yet  available,  but  the  Hon. 
J.  A.  Millar,  the  new  Minister  of  Railways,  has  stated  that  the  pross  reve- 
nue for  the  year  was  £3,249,790,  the  expenditures  £2,164,000,  and  the 
"net  profit"  £1,085,790,  which  is  3.78  per  cent,  upon  the  capital  cost  of 
the  open  lines.  This  excellent  re.«ult  has  come  from  a  larpe  increase  in 
pross  earning's  coupled  v,'ith  economy  in  administration.— Otogo  Daily 
Times,  May  31, 1910. 


76     STATE  SOCIALISM   IN  NEW  ZEALAND 

"In  the  South  Island  the  haulage  to  the  ports  is  over  com- 
paratively short  distances,  and  competitive  rates  are  in  existence  in 

some  places,  owing  to  sea  competition.  On  the 
Troubles  due  to  ^^'cUington-Napier-New   Plymouth   Section    and 

the  Auckland  Section  the  haulage  is  longer, 
Depreciation  there  is  little  sea  competition,  and  the  lines  are 

newer  in  comparison  with  the  southern  ones. 
Age  brings  its  troubles  to  railways  as  well  as  to  individuals.  The 
pioneer  lines  have  had  to  be  brought  up  to  standard  require- 
ments to  meet  the  demands  of  business  by  repairs,  additions 
to  structures,  bridges  and  station  accommodations.  As  the  North 
Island  lines  increase  in  age  they  will  require  more  expenditure 
on  repairs  than  at  the  present  moment,  and  they  will  then  go  through 
the  same  process  that  the  Southern  lines  have.  .  .  .  The  dis- 
proportion between  the  revenue  and  the  expenditure  will,  as  the 
years  go  on,  become  equally  as  marked  in  the  North  Island  as  the 
honourable  member  has  said  it  is  now  in  the  South  Island."  (Par- 
liamentary Debates,  vol.  139,  p.  664,  July  26,  1907.) 

If  this  is  true,  the  financial  prospects  of  the  railways 
are  discouraging,  since  they  are  not  an  appreciating  asset, 
as  the  Department  usually  claims ;  and  the  critics  must 
be  largely  right  in  holding  that  either  "  additions  to 
open  lines  "  should  be  charged  to  revenue,  or  there  should 
be  a  large  allowance  for  depreciation,  in  addition  to  the 
allowance  for  maintenance,  which  is  already  high. 
{The  Star,  Auckland,  February  17,  1908.)  In  1895  the 
expenditure  on  maintenance  was  £141  per  mile  of  line; 
in  1909  it  was  £258,  and  one  would  think  that  this  should 
be  sufficient  to  keep  the  system  in  good  condition  with- 
out any  allowance  for  depreciation. 

Another  explanation  of  the  deficit  is  given  in  the 

Railways  Statement  for  1909,  where  the  new  Minister  of 

Railways,  the  Hon.  J.  A.  Millar,  says: 

„  ,.  "The    enhanced    price    of    materials,     in- 

t/Xpenditure  creased  rates  of  wages,  and  expenditure  incurred 

on  the  works  enumerated  (track  renewals),  has 
had  a  marked  effect  on  the  maintenance  expenditure,  which  has 
steadily  increased  during  the  past  ten  years.  Our  railway  lines  are, 
however,  in  a  better  condition  than  at  any  other  period  during 
their  history." 

Still  another  explanation  of  the  deficit  that  is  given 

by  the  Government  is  that  great  concessions  have  been 


RAILWAY  FINANCE  77 

given  to  the  public  in  fares,  freights  and   train  services, 

and    to    the  railway  employees  in  wages  and  salaries. 

Speaking,  apparently,  of  the  period  between    1895  and 

1907,  Sir  Joseph  Ward  said: 

"  The  concessions  given  to  the  public  in  the  matter  of  farec 
and  freights  amounted  to  £850,000,  and  the  value  of  increased  train 
services  to  £883,000.  .  .  .  This  takes  no  account  of  the  con- 
sessions  in  pay  given  to  the  railway  staff,  which  amounted  to  another 
£375,000."     {The  Star,  Auckland,  February  17,  1908.) 

Undoubtedly,  wages  and  salaries  have  been  slighly 
increased  from  time  to  time,  to  keep  pace  in  a  measure 
with  the  general  increase  in  wages  and 
cost  of  living,  offset,  however,  by  Wages  of  Rail- 
increased  revenue,  due  to  the  general  way  Servants 
prosperity  of  the  country.  But  such 
increases  can  hardly  be  regarded  as  voluntary  "  conces- 
sions," or  gifts,  since  even  now  the  railway  men,  if  one 
may  believe  the  Amalgamated  Society  of  Railway 
Servants,  and  their  organ,  the  Railway  Review,  (The 
New  Zealand  Railway  Review,  a  journal  devoted  to  the 
interests  of  the  New  Zealand  Railway  men)  are  receiving 
wages  rather  less  than  those  paid  in  private  employ,  while 
the  hours  of  labour  are  frequently  much  higher  than 
would  be  tolerated  in  any  private  business  subject  to  the 
jurisdiction  of  the  Arbitration  Court. 

In  1907  there  were  only  thirty-one  officials  who  re- 
ceive salaries  of  £400  ($2,000)  or  more.  The  general 
manager  receives  a  salary  of  £1,250  ($6,200),  the  chief 
engineer  £900,  the  chief  traffic  manager  £800,  the  chief 
clerk  £500.  The  most  highly  paid  station  master,  who 
has  been  in  the  service  for  forty  years,  receives  only 
£355  ($1,720).  Enginemen  receive  from  105.  M.  ($2.60) 
to  I2s.  ($3)  a  day,  firemen  from  "s.  6d.  ($1.85)  to  95. 
($2.25)  a  day,  common  labourers  generally  js.  ($i.j^)  a 
day.     (Members  of  the  Railways  Department,   1907.) 


78     STATE  SOCIALISM  IN  NEW  ZEALAND 

Salaries  and  wages  are  now  slightly  higher  than  they  were 
in  1907,  but  there  is  no  evidence  to  show  that  any 
material  concessions  have  been  made  to  railway  employ- 
ees. However,  they  have  the  special  advantages  of 
regular  and  permanent  employment  and  of  retiring  allow- 
ances under  the  superannuation  system.  (Government 
Railways  Act,  1908.) 

It  is  equally  difficult  to  see  how  it  can  be  claimed 
that  any  such  sum  as  £883,000  has  been  returned  to  the 

public  in  the  form  of  increased  train 
Concessions  in  services.  The  business  of  the  railways 
Train  Services      has  greatly  increased,   necessitating  an 

increase  in  train  service,  but  this  can 
hardly  be  regarded  as  a  gift,  since  the  public  presumably 
pays  for  what  it  thus  receives,  unless  the  service  is  in 
excess  of  what  the  traffic  requires.  However,  unrea- 
sonably concessions  are  constantly  demanded  by  the 
public,  and  the  Department  sometimes  gives  way,  thus 
sacrificing  business  principles  to  political  considerations. 
There  is  more  ground  for  the  statement  that  con- 
cessions have  been  made  in  fares  and  freights,  although 

it    seems    that    the     Department    has 
oncessions  m    overestimated   the  value  of  these  con- 
Fares  and  •  1  T        1 
Freights                cessions   also.      In    the    year    1895    the 

average  charge  per  ton  of  freight  carried, 
exclusive  of  cattle  and  sheep,  was  £.333;  in  1908 
it  was  £.327.  In  1895  the  average  charge  per  ordi- 
nary passenger  carried  was  £.092;  in  1908  it  was 
£.085.  These  figures  take  no  account  of  considerable 
reductions  in  fares  for  season  tickets,  designed  to  de- 
velope  suburban  and  tourist  traffic,  nor  of  school  excur- 
sion fares  and  other  minor  concessions.  But  it  is  a 
question  how  far  reductions  in  fares  and  freights  are  to 
be   regarded    as  "  concessions,"  since    they  appear   to 


RAILWAY  FINANCE  79 

have  been  for  the  most  part  justified  from  a  business 
point  of  view  by  the  increase  in  trafific  which  they  have 
helped  to  develope.  In  1895  only  2,048,391  tons  of 
freight  were  carried,  exclusive  of  cattle  and  sheep;  in 
1908  4,834,534  tons  were  carried.  In  1895  there  were 
3,905,578  ordinary  passengers;  in  1908  there  were 
9,755,716.  (Railways  Statement,  1908,  returns,  Nos.  5 
and  16.) 

Sir  Joseph  Ward  has  frequently  said  that  it  would  be 
easy    to   extinguish    the   deficit   by    increasing    railway 
charges,  and  that,  if  required,  as  much 
as  10  per  cent,  could  be  earned  upon  the         f^  ^  lono 
capital  cost.     (The  Star,  Auckland,  Feb-      j^^^  profits 
ruary  17,  1908.)     It  is  a  question,  how- 
ever, whether  the  Department  is  not  already,  in  most 
places,  charging  all  that  the  traffic  can  bear,  and  whether 
a  reduction  in  rates  would  not  be  more  productive  of  net 
revenue  than  an  increase.     As  Sir  Joseph  himself  said, 
in  a  recent  speech  at  Carterton: 

"  If  rates  were  increased,  it  would  mean  that  the  revenue 
would  be  reduced,  there  would  be  fewer  trains,  and  a  number  of 
hands  would  be  dismissed."  {The Evening  Post,  Wellington,  Novem- 
ber 5  and  12,  1908.) 

As  to  the  claim  that  net  profits  of  10  per  cent,  could 
be  earned  by  merely  increasing  charges,  it  can  hardly 
have  been  seriously  made.  The  gross  earnings  in  1909 
were  not  much  more  than  10  per  cent,  upon  the  capital 
cost  of  the  open  lines,  and  to  produce  a  net  revenue  of  10 
per  cent,  it  would  be  necessary  to  increase  the  gross 
revenue,  and  presumably  the  fares  and  freights,  by  at 
least  60  per  cent.,  assuming  that  the  traffic  and  expendi- 
ture would  remain  the  same.  But  such  an  increase  in 
rates  would  cause  a  sharp  falling  off  in  traffic,  and,  in- 
stead of  producing  a  larger  net  revenue,  would  probably 
cause  the  deficit  to  increase  and  greatly  injure  the  coun- 


8o     STATE  SOCIALISM  IN  NEW  ZEALAND 

try  at  large.  If  the  Department  could  increase  the 
charges  in  certain  districts  and  lower  them  in  others, 
according  to  the  amount  and  character  of  the  traffic,  it 
might  be  possible  to  secure  a  considerable  increase  in 
net  revenue,  but  this  would  be  adopting  the  practice  of 
differential  rating,  for  which  the  commissioners  were 
execrated,  and  which  would  cause  a  storm  of  protest 
and  complaint,  with  charges  of  favouritism  and  the 
like,  such  as  no  democratic  government  could  resist. 
The  chief  causes,  then,  of  the  railway  deficit,  appear 
to  be  the  following: 

I.  The  construction  of  lines  in  ad- 
Causes  of  vance  of  requirements. 
the  Deficit  2.  The  high  cost  of  all  lines. 

3.  Delays  in  the  construction  of  lines 
that  might  have  been  profitable,  due  chiefly  to  lack  of 
funds. 

4.  Unprofitable  concessions  in  service,  fares,  and 
freights. 

5.  A  rigid  system  of  rates. 

6.  A  high  cost  of  maintenance  and  operation,  partly 
due  to  a  certain  lack  of  discipline,  initiative  and  efficiency 
in  the  railway  service.  This  is  disputed,  and  is  hard  to 
prove. 

One  of  the  most  serious  causes  of  inefficiency  and 
dissatisfaction  is  the  system  of  promotion.     Men  are 

usually  promoted  merely  because  their 
Efficiency  of  names  come  first  on  the  list  of  seniority, 
Railway  Service   unless  it  can  be  proved  that  they  are 

actually  incapable,  which  is  difficult. 
The  theoretical  right  to  advance  capable  men  over 
their  seniors  is  practically  never  exercised,  because  of  the 
unpleasantness  and  difficulty  of  proving  alleged  unfitness. 
Until  a  thoroughgoing  system  of  promotion  by  merit  is 


RAILWAY  FINANCE  8i 

introduced,  there  will  never  be  an  efficient  service.  Yet 
promotion  by  merit  lends  itself  readily  to  favouritism  and 
other  abuses. 

Workers  in  the  Government  shops  have  frequently 
been  accused  of  practising  the  "  Government  stroke." 
The  general  manager,  Mr.  T.  Ronayne, 
recently  wrote  a  strong  letter  to  the  The  Addington 
chief  mechanical  engineer  at  the  Ad-  Workshops 
dington  Workshops,  making  serious 
charges  of  inefficiency.  However,  when  the  board 
of  enquiry  appointed  to  investigate  the  charges  met 
at  Christchurch  on  March  ii,  1909,  the  general  man- 
ager said  that  he  had  been  misinformed  and  that  he 
was  perfectly  satisfied  with  the  condition  of  the  work- 
shops. Yet  in  the  course  of  the  investigation  certain 
significant  facts  were  brought  out,  such  as  the  difficulty 
of  getting  rid  of  inefficient  men,  the  difficulty  of  getting 
good  men  when  needed,  the  lack  of  encouragement  to 
inventors  and  other  good  men  by  promotion  and  ad- 
vances in  salary,  the  lack  of  initiative  on  the  part  of  the 
workshops  manager,  and  the  lack  of  up-to-date  appli- 
ances in  certain  lines  of  work.  The  board  of  enquiry, 
the  chairman  of  which  was  a  distinguished  engineer, 
Professor  R.  J.  Scott  of  Canterbury  College,  arrived  at 
the  conclusion  that  the  cost  of  production  was,  generally 
speaking,  greater  at  Addington  than  at  private  and 
other  Government  workshops,  and  the  output  smaller 
in  proportion  to  the  number  of  hands  employed.  Com- 
menting on  this  report  the  Evening  Post  said : 

"  Here  in  miniature  we  have  the  evils  depicted  which  are  ram- 
pant more  or  less  in  every  branch  of  the  Public  Service;  and  if  the 
result  is  that  at  Addington  we  are  paying  from  30  to  60  or  70  per 
cent,  more  for  the  work  done  than  it  would  cost  us  elsewhere,  it  is 
natural  to  infer  that  the  Public  Service  as  a  whole  is  also  costing  far 
beyond  its  value."  (The  Evening  Post,  Wellington,  June  17,  1909; 
The  Press,  Christchurch,  June  18,  190Q.) 


8a     STATE  SOCIALISM  IN  NEW  ZEALAND 

For  these  and  other  causes  the  New  Zealand  railways 
have  never  earned  the  full  amount  of  interest  on  the 

capital  cost.  But  the  Government  has 
Three  per  Cent,  frequently  declared  that  it  does  not 
Policy  wish  to  make  the  railways  pay.     In  the 

Railways  Statement  for  1905  Sir  Joseph 

Ward  says: 

"  The  policy  of  the  Government  has  been  throughout  to  regard 
the  railways  as  adjuncts  to  the  settlement  of  the  country,  and  to 
look  upon  the  earning  of  a  large  profit  as  of  minor  importance  com- 
pared with  the  incalculable  benefits  that  accrue  to  the  State  by 
giving  the  settlers  a  convenient  and  cheap  means  of  transporting 
the  produce  of  their  farms  to  the  markets,  and  any  surpluses  which 
have  accrued  after  the  payment  of  the  minimum  of  3  per  cent,  on  the 
capital  cost  of  the  lines  have  been  returned  to  the  users  of  the  rail- 
ways in  cheapened  freights  and  increased  facilities." 

Just  why  3  per  cent,  should  be  preferred  to  3.72  per 
cent.,  the  average  rate  of  interest  now  paid  upon  Govern- 
ment loans,  or  why  it  would  not  be  as  well  to  earn  only 
2  per  cent.,  it  is  difficult  to  say.  But  it  is  not  hard  to 
understand  how  it  came  to  be  thought  that  the  railways 
should  be  operated  primarily  for  development  rather  than 
for   profit. 

New  Zealand  was,  and  is,  a  new  country,  with  large 
undeveloped  resources,  and  the  people  of  every  district 

desire  roads  and  railways  as  a  means  to 
Development  of  111  ^       t-      ^1       1      j 

a  New  Country  one  end,— development.  To  the  land- 
owner, development  means  enhanced 
prices  for  land ;  to  the  merchant  and  manufacturer  it  means 
an  expanding  market  for  their  goods;  to  the  labourer  it 
means  high  wages,  steady  employment,  and  opportunity 
for  advancement,  particularly  while  the  developmental 
works  are  going  on.  It  was  inevitable,  then,  that 
emphasis  should  be  laid  upon  development,  social  service, 
and  all  the  present  and  prospective  benefits  of  public 
works,  rather  than  upon  considerations  of  cost,  which 
would  have  operated  as  a  check  upon  public  expenditure, 


RAILWAY  FINANCE  83 

and  might  have  retarded  to  some  extent  the  speed  of 
economic  development.  Besides,  it  was  not  necessary 
to  pay  cash  down;  it  was  possible  to  borrow,  and  thus 
shift  the  burden  of  cost  upon  the  shoulders  of  future 
generations,  which  would  presumably  be  well  able  to 
bear  it.  Moreover,  it  was  thought  by  some,  notably 
Sir  Julius  Vogel,  that  the  railways  would  sooner  or  later 
pay  many  times  over  all  the  cost  of  construction  and  all 
the  losses  and  deficits  of  their  early  years. 

Hence  the  people  in  every  part  of  the  country  de- 
manded railways,  formed  associations  for  the  purpose 
of  securing  them,  elected  members  to 
Parliament  pledged  to  do  their  utmost  Political  Rail- 
to  that  end;  and  the  Government,  un-  ways 
able  to  resist  the  pressure  of  public 
opinion,  borrowed  as  much  as  it  could,  and  built  short, 
unprofitable  bits  of  line  without  counting  the  cost.  The 
landowners  as  a  class,  who  were  the  strongest  political 
force  in  the  colony,  were  naturally  the  most  eager  to  have 
railways  built,  loudest  in  their  demands  for  low  rates, 
most  intense  in  their  scorn  of  base  commercialism  in 
railway  management.  The  railways  might  never  pay 
expenses,  not  to  speak  of  interest  on  the  capital  cost, 
much  less  contribute  to  the  liquidation  of  the  public  debt, 
but  land  values  would  increase,  and  they  themselves 
would  gain  in  "  unearned  increments  "  far  more  than 
they  would  have  paid  in  additional  taxation. 

The  question  at  bottom  is  one  of  social  utility  versus 

social  cost,  and  it  must  be  said  that,  on  the  whole,  New 

Zealand  has  gained  more  than  it  has  lost 

by  the  building  of  railways.    But  it  would      .  **^^,    .**^ 
,  .       ,  ,    ,  ,  .r     ■,  in  Relation  to 

have  gamed  more  and   lost  less  if  the      social    Cost 

people  and    the  Government  had    laid 

more  stress  upon  the  idea  of  cost,  and  had  in  every  case 


84     STATE  SOCIALISM  IN  NEW  ZEALAND 

bent  their  efforts  toward  securing  a  maximum  of  benefit 
at  a  minimum  of  cost.  Social  benefit  and  social  cost  are 
vague  concepts,  hard  to  measure;  but  they  can  be 
measured  with  some  exactness  by  means  of  money,  and 
the  financial  measuring-rod  must  be  applied  to  them  if 
the  people  wish  to  know  whether  a  governmental  under- 
taking is  socially  advantageous  or  not.  In  the  case  of 
the  public  schools,  the  cost  can  be  measured,  but  not  the 
product,  for  that  is  non-material,  and  has  no  definite  mar- 
ket value;  and  this  is  the  cause,  too,  of  much  of  the 
inefficiency  that  characterizes  the  school  system.  But, 
in  the  case  of  the  railways,  it  is  quite  possible  to  measure 
benefit  as  well  as  cost,  and  to  strike  a  balance  of  profit  or 
loss  in  terms  of  money.  If  this  is  not  done,  there  is  no 
exact  standard  of  efficiency  and  no  measure  of  social 
benefit  other  than  the  vague  surmise  of  some  one  who 
thinks  that  a  given  undertaking  was  well  worth  all  it  cost. 
A  district  that  cannot  supply  enough  traffic  to  make 
a  railway  pay,  sooner  or  later,  should  not  have  a  railway 

at  all;  and  if,  in  spite  of  the  prospective 
Parasitic  loss,  the  railway  is  built,  it  becomes  a 

Railways  parasitic  enterprise,  drawing  sustenance 

from  other  industries  and  other  parts 
of  the  country,  which  receive  no  direct  benefit  and  can- 
not afford  to  pay  for  indirect  benefits,  since  they  all  have 
their  own  burdens  to  bear.  Similarly,  it  is  neither  eco- 
nomical nor  just  to  make  concessions  in  rates  or  service 
and  cause  the  resulting  deficit  to  fall  upon  the  taxpayers, 
unless  the  taxpayers,  within  a  reasonable  time,  are  going 
to  get  their  money  back.  If  all  the  users  of  the  railways 
are  taxpayers,  it  is  a  matter  of  indifference  to  them 
whether  they  pay  more  taxes  or  higher  rates.  For  the 
sake  of  sound  finance  they  should  pay  higher  rates.  But, 
if  some  taxpayers  are  not,  directly  or  indirectly,  users  of 
the  railways,  then  the  policy  of  gratuitous  concessions 


RAILWAY  FINANCE  85 

involves  making  people  who  do  not  enjoy  the  benefits 
of  railway  transportation  pay  for  those  who  do,  and 
who,  moreover,  are  well  able  to  pay  for  them  themselves. 

It  is  said  that  the  country  must  be  developed.  But 
it  is  neither  necessary  nor  possible  to  build  railways  every- 
where, and  it  is  possible  to  spend  more  rpj^g  j^g^.  ^f  p^.j._ 
in  the  development  of  a  district  than  the  ness  in  Railway 
district  deserves  or  than  the  country  at  Construction, 
large  can  afford.  Every  district  claims  Service  and 
what  it  calls  its  "fair  share  "  of  public  ^^^^Ses 
expenditure,  but  can  allege  no  sound  principle  of  fairness 
other  than  the  prospect  of  developing  a  large  population, 
large  wealth,  and  a  profitable  traffic.  It  is  not  reasonable 
to  expect  a  new  line  to  pay  from  the  very  first,  but  long- 
established  lines  ought  to  pay,  and  pay  enough  to  recoup 
the  Government  for  all  the  losses  of  earlier  years.  The 
idea  of  making  the  railways  a  profitable  investment 
ought  ever  to  be  kept  in  mind  as  a  check  upon  ex- 
travagant expenditure  and  a  guide  to  further  exten- 
sion. If  this  is  not  the  test  of  fairness  in  railway 
construction,  service  and  charges,  then  there  is  no 
test  other  than  political  influence  and  the  granting 
of  concessions  to  purchase  votes, —  a  practice  that  has 
done  great  harm  in  the  past  and  will  greatly  retard  the 
future  development  of  the  Dominion,  unless  the  Govern- 
ment sternly  sets  its  face  against  the  political  control 
of  railways  and  toward  the  establishment  of  sound  finan- 
cial principles  in  every  part  of  the  administration. 

Indeed,  the  financial  failure  of  the  railways  has  been 
one  of  the  chief  causes  of  the  slow  growth  of  railways 
during  the  past  thirty  years.    A  section 
of  the  main  trunk  line  between  Auckland  Unprofitable 

j-^-  ...  ,  M      .     ,  ,     Railways  retard 

and  VVeilmgton  about  200  miles  m  length,  Development 

has  taken  twenty-three  years  to  build, 


86     STATE  SOCIALISM  IN  NEW  ZEALAND 

although  it  was  the  most  important  Hnk  in  the  whole 
system,  and  promised  to  develop  a  large  and  profitable 
traffic. 

"  Apart  from  the  fact  that  this  dilatory  method  of  construction 
has  added  enormously  to  the  cost,  it  is  appalling  to  think  of  the  huge 
sum  which  the  Dominion  has  paid  in  interest  during  construction, 
to  say  nothing  of  the  returns  which  might  have  been  gathered  in  and 
the  settlement  which  would  have  been  promoted,  had  the  work  been 
completed  with  reasonable  dispatch."  {The  Press,  Christchurch, 
September  23,  1908.) 

There  have  been  two  chief  causes  of  this  delay  and 
loss.  In  the  first  place,  the  funds  available  for  railway 
construction  have  been  distributed,  not  to  say  frittered 
away,  in  various  parts  of  the  country,  in  the  building  of 
small  bits  of  line,  instead  of  being  concentrated  on  one  or 
two  important  works.  This  was  largely  due  to  political 
considerations.  Secondly,  the  funds  at  the  disposal  of  the 
Government  were  limited,  because  the  Government 
could  not  advantageously  borrow  more  than  a  certain 
amount  every  year,  although  much  larger  sums  were 
urgently  needed.  If  the  railways  already  built  had  been 
paying  investments,  earning  the  full  interest  on  the 
capital  cost,  and,  perhaps,  a  surplus  to  apply  to  improve- 
ments, the  considerable  sums  now  borrowed  for  "  addi- 
tions to  open  lines  "  would  have  been  available  for  new 
construction,  and  it  would  have  been  easy  to  borrow  all 
the  money  needed  for  projected  lines  if  only  they  prom- 
ised, in  their  turn,  to  become  paying  investments. 
Thus  the  districts  already  supplied  with  railways,  by 
their  narrow  and  selfish  policy,  have  not  only  compelled 
the  people  who  had  no  railways  to  contribute  to  the 
deficit,  but  have  for  years  prevented  these  people  from 
getting  railways  in  districts  that  could  be  developed  and 
could  supply  a  profitable  traffic. 

The  present  Government   is  aware  of  these   facts; 


RAILWAY  FINANCE  87 

and,  notwithstanding  its  own  statements  to  the  con- 
trary, which  must  be  regarded  as  dic- 
tated   by   political   expediency,    it   does  ,.^*      ^^,^'... 

,  .,  TT-  ,  lightened  Public 

wish  to  make  tie  railways  pa3\    Hitherto  oninion 

public  opinion  has  not  been  educated  up 
to  the  point  where  it  would  sustain  the  Government  in 
trying  to  apply  commercial  principles  to  railway  man- 
agement. But  public  opinion  is  changing  in  this  regard. 
What  Dr.  Victor  Clark  says  of  Australia,  "The  bad 
economy  of  building  non-paying  lines  is  now  well  under- 
stood," (Quarterly  Journal  of  Economics,  May,  1908), 
is  coming  to  be  true  of  New  Zealand  also,  and  doubtless 
in  the  near  future  the  bad  economy  of  non-paying 
operation,  of  all  sorts  of  unprofitable  concessions,  will  be 
equally  well  understood. 

The  Government  is  in  a  difficult  position.  Here  is 
an  undeveloped  district  crying  for  a  railway ;  there  a 

rich  and  prosperous  community  is  clam- 

r  r  \  •    J      r\     Demand  for 

ouring  lor  concessions  or  every  kind.    On  ^ 

the  one  hand,  the  railway  servants  de-  from  All  Sides 
mand  higher  wages  and  shorter  hours; 
on  the  other,  the  Department  of  Labour  asks  that  rail- 
way construction  be  made  subordinate  to  the  provision 
of  work  for  the  unemployed.  And  yet  the  financial 
critics  expect  the  railways  to  pay  interest  on  the  capital 
cost  and  earn  a  surplus  for  "  additions  to  open  lines." 

Sir  Joseph  Ward,  in  a  speech  in  the  House,  made  a 
most  effective  reply  to  those  members  who,  in  one 
breath,  condemn  the  Government  for  extravagant  expen- 
diture, and,  in  the  next,  ask  favours  of  all  kinds  for  their 
constituencies.    He  said: 

"  What  is  the  use  of  any  one  indulging  in  what  is  nothing  more 
or  less  than  colossal  hypocrisy,  in  urging  that  the  Government 
should  keep  down  the  expenditure  of  loan  money,  in  proclaiming  that 
we  have  obtained  too  much  loan  money,  when  every  honourable 


88     STATE  SOCIALISM  IN  NEW  ZEALAND 

member  knows  that  ever  since  the  beginning  of  the  session  the 
Order  Paper  has  been  crowded  every  day  with  questions  asking  for 
new  railways,  asking  for  new  public  buildings,  asking  for  increases 
in  salaries  and  increases  in  wages  of  public  employees,  asking  for 
concessions  in  getting  some  of  the  public  utilities  at  less  than  cost 
price.  .  .  .  The  whole  pretence  of  declaiming  against  borrowing 
money  and  at  the  same  time  appealing  in  other  directions  for  large 
sums  to  be  expended  out  of  borrowed  money  is  really  political 
hypocrisy."     (Pari.  Debates,  Vol.  139,  p.  622,  July  24,  1907.) 

Notwithstanding    the    large    financial    losses   of    the 
railways,  practically  nobody  in  New  Zealand  proposes 
private  ownership  as  a  remedy.  The  rail- 
Private  Owner-    ^ays.could  probably  be  sold  for  a  sum  at 
ship  not  Fa-         ,     "^  ,  ,     .  •     ,  ,  •    • 

voured  least  equal  to  their  capital  cost,  and  it  is 

probable  that  a  private  company  could  so 
operate  the  lines  as  to  pay  interest  on  the  cost  of  purchase, 
taxes  on  its  property,  and  moderate  but  increasing  divi- 
dends on  its  stock.  From  a  merely  financial  point  of 
view  it  would  probably  pay  to  sell  the  railways  to  a 
private  syndicate,  which,  like  the  railway  companies 
of  the  United  States  and  Canada,  would  do  much  to 
develop  the  varied  resources  of  the  country.  Or,  the 
railways  might  be  leased  to  a  private  company,  as  pro- 
vided for  in  the  Act,  and  in  this  way  the  Government 
might  have  the  burden  of  interest  on  the  railway  debt 
taken  ofT  its  hands,  and  receive  in  addition  a  consider- 
able rent  for  the  monopoly  which  the  lessee  would  receive, 
(An  Act  to  consolidate  and  amend  the  Law  relating 
to  the  Maintenance  and  Management  of  Government 
Railways,  1900,  Sect.  34.) 

But  no  such  proposal  would  find  favour  in  New 
Zealand.    Sir  George  Grey  once  said  in  the  House: 

"  If  we  were  to  sell  our  railways,  we  should  deal  as  great  a  blow 
at  the  future  prosperity  of  New  Zealand  as  it  would  be  possible  for 
our  greatest  enemies  to  achieve."  Even  Mr.  Vaile  is  a  strong  believer 
in  government  ownership,  and  says  of  his  own  criticism  of  the  rail- 
way administration:  'It  has  been  anything  but  pleasant  work  for 
me  to  write  as  I  have  done,  for  I  feel  that  my  exposure  of  the  utter 


RAILWAY  FINANCE  89 

failure  of  the  system  in  this  country  will  be  used  against  me  and  I 
fear  that  an  agitation  will  arise  for  the  sale  of  our  lines."  (New 
Zealand  Railway  Administration,  by  S.  Vaile.    Auckland,  1906.) 

It  would  be  highly  presumptuous  in  the  present 
writers  to  say  that  New  Zealanders  are  wrong  in  this 
regard,  for,  while  the  sale  of  the  railways  to  a  private 
company  would  probably  yield  good  financial  returns, 
and  further  rather  than  retard  the  development  of  the 
country,  the  creation  of  a  great  monopolistic  corporation 
might  introduce  a  source  of  corruption  new  to  the  political 
life  of  the  Dominion,  and  for  this  reason,  if  for  no  other, 
the  people  of  New  Zealand  may  do  well  rather  to  bear  the 
ills  they  have  than  fly  to  others  that  they  know  not  of. 

Already    there   appears    to    be    a   strong    tendency 
toward    improvement    in    the    railway    administration, 
encouraged  by  wholesome  criticism  and 
suggestion  from  without.  ("  Railway  Re-    ''"Provement 
r  ,,  .         r        .  ,       .       ,      ^        .         in  Railway 

form,  a  series  of  articles  m  the  Et'ewtwg  Administration 
Post,  by  A.  G.  Stephens,  January  9,  to 
March  3,  1909.)  One  of  the  most  interesting  suggestions 
has  originated  with  Mr.  Vaile,  who  has  for  years  devoted 
much  time  and  thought  to  railway  problems.  Mr. 
Vaile  invented  the  "  stage  system  "  of  railway  rates,  in 
1882,  some  years  before  the  introduction  of  the  well- 
known  "  zone  system  "  of  Hungary.  Mr.  Vaile's  system, 
however,  is  the  reverse  of  the  Hungarian,  which  gives  bet- 
ter rates  to  urban  than  to  rural  districts,  and  thus  fur- 
thers the  concentration  of  population  in  cities.  Mr. 
Vaile  considers  that  the  chief  object  of  railway  adminis- 
tration should  be  to  prevent  this  concentration  by  dis- 
tributing population  and  placing  people  upon  the  land. 
He  would  accomplish  this  end  by  making  railway  rates 
in  rural  districts  very  low  and  in  urban  districts  relatively 
high.  The  region  served  by  any  railway  would  be 
divided  into  stages,  short  stages  in  thickly  settled  dis- 


90     STATE  SOCIALISM  IN  NEW  ZEALAND 

tricts  and  long  stages  in  the  country,  and  the  fares  and 
freight  charges  would  be  the  same  for  any  stage,  long  or 
short.  For  example  the  second-class  passenger  fare  for  a 
stage  of  six  miles,  from  Auckland  to  Penrose,  would  be 
4.d.  (8  cents,  or  1.3  cents  per  mile),  while  for  the  same 
fare  one  could  travel  from  Frankton  to  Te  Kuiti,  a  dis- 
tance of  41  miles,  making  only  id.  (2  cents)  per  passenger 
mile. 

Thechief  effects  of  this  system,  as  enumerated  by  Mr. 
Vaile,  would  be  the  distribution  of  population,  the  crea- 
tion  of   inland    trade,   a  great  increase 
Proposals  of         in  land  values,  and  a  large  increase  in 
Mr.  Vaile  railway  revenue.     It  is  evident  that  Mr. 

Vaile  does  not  sufficiently  consider  the 
limits  to  the  possible  development  of  rural  traffic  and 
the  financial  loss  which  the  Department  would  suffer 
if  it  had  to  carry  a  small  traffic  at  such  exceedingly  low 
rates.  New  Zealand  has  not  yet  suffered  much  from  con- 
gestion of  population  in  great  cities,  but  Mr.  Vaile's 
suggestion  as  to  the  distribution  of  population  may 
yet  have  to  be  considered,  especially  in  more  highly 
developed  industrial  countries,  where  the  growth  of 
enormous  cities  constitutes  a  serious  menace  to  the 
future  welfare  of  the  human  race.  (Railways  and  Social 
Conditions,  Auckland,  1904;  Social  Problems,  Auckland, 
1899;  The  Railway  Problem,  Auckland,  1908;  and  var- 
ious other  pamphlets  by  Samuel  Vaile.) 

Again,  it  is  proposed  that  the  railways  be  once  more 

placed  in  the  hands  of  a  commission  of  experts,  who,  to  a 

large    extent    independent    of  political 

a  way  control,  may  administer  the  system  in  a 

Commission  .  •     •       ^u    ^ 

Proposed  busmess-like  way.     1  he  commission  that 

had  charge  of  the  railways  from  1889  to 

the  end  of  1894  h^s  frequently  been  accused  of  despotism 


RAILWAY  FINANCE  91 

and  inefficiency,  but  in  reality  its  administration  com- 
pares very  favourably  with  that  which  preceded  it, 
and  the  country  gained  little  or  nothing  by  reverting  to 
direct  parliamentary  control.  The  general  prosperity  of 
New  Zealand  and  of  the  world,  since  1894,  together  with 
the  fall  in  the  rate  of  interest  on  New  Zealand  loans, 
has  largely  obscured  the  bad  effects  of  political  manage- 
ment.   But  they  have  existed,  nevertheless. 

The  Australian  States,  notably  Victoria  and  New 
South  Wales,  seem  to  have  benefited  greatly  by  the 
introduction  of  the  commission  form  of  railway  adminis- 
tration. A  commission  is  not,  and  cannot  be,  wholly 
removed  from  that  source  of  demoralization  than  a 
Government  Department,  with  a  cabinet  minister  at  its 
head.  A  commission  can  be  a  good  deal  more  independ- 
ent than  a  general  manager  who  derives  all  his  power 
from  the  minister.  The  chief  objections,  real  or  alleged, 
to  a  commission  are  that  it  is  too  independent,  perhaps 
even  despotic,  not  sufficiently  in  touch  with  the  people 
and  their  needs,  too  conservative  in  policy,  and  liable 
to  all  the  abuses  characteristic  of  governmental  bureaus, 
— abuses  which  it  is  very  hard  to  eradicate.  (Vaile, 
"  The  Future  Control  of  our  Railways,"  Auckland, 
1893;  "Story  of  New  Zealand,"  chap.  31.)  And  yet, 
the  balance  of  argument  seems  to  be  in  favour  of  the 
commission  form  of  railway  administration. 

But  the  prospects  of  improvement  in  railway  affairs, 
even  under  the  present  form  of  administration,  are 
somewhat  encouraging.  After  many  years  of  delay  the 
main  trunk  line  of  the  North  Island  has  been  finished ;  the 
successful  Manawatu  line  has  been  purchased;  the 
Government  has  determined  upon  a  policy  of  concentra- 
tion in  railway  construction  and  economy  in  management ; 
and,  best  of  all,  there  has  been  a  gratifying  change  of 


92     STATE  SOCIALISM  IN  NEW  ZEALAND 

opinion  with  regard  to  the  bad  economy  of  building 
unprofitable  lines  and  the  equally  bad  economy  of  making 
unprofitable  concessions  at  the  expense  of  the  taxpayers 
and  those  who  have  waited  long  for  railways  that  never 
come. 

The  new  minister  of  railways,  the  Hon.  J.  A.  Millar, 
has  definitely  abandoned  the  three  per  cent,  policy,  and 
has  repeatedly  stated  that  it  is  now  the 
The  Three  per         jj^     ^^  ^j^^  Government  to  make  the 
Cent.  Policy  .,  ,     .  .  . 

Abandoned  railways  earn  their  own  rate  ot  interest. 

{The  Evening  Post,  Wellington,  Decem- 
ber II,  1909;  The  Otago  Daily  Times,  May  31,  1910.) 
In  fact,  the  Government  has  gone  so  far  as  to  ask,  as  a 
condition  of  completing  the  Lawrence-Roxburgh  Rail- 
way, that  the  people  of  the  district  guarantee  at  least 
three  per  cent,  upon  the  capital  cost.  {Evening  Post, 
October  19,  1909.)  Then,  too,  the  Dominion  is  rapidly 
increasing  in  population  and  wealth,  so  that,  unless  the 
Government  goes  into  the  construction  of  other  unprofit- 
able lines,  the  deficit  should  soon  disappear,  and  there 
should  be  a  surplus  to  apply,  if  not  to  the  reduction  of  the 
debt,  at  least  to  the  improvement  of  the  open  lines. ^ 

It  cannot  be  sound  policy  for  a  country  like  New 
Zealand,  where  the  Government  does  so  many  things,  to 
allow  governmental  enterprises  to  be  carried  on  at  a  loss. 
Other  countries  can  perhaps  afford  the  luxury  of  deficits 
in  the  postal  service  and  the  like,  because  they  merely 
play  at  governmental  ownership,  but  to  adopt  this 
policy  on  a  large  scale  would  be  to  start  upon  the  down- 
ward path  that  leads  to  ruin.  Governmental  property 
pays  no  taxes,  and,  when  there  is  a  deficit,  it  must  fall, 
sooner  or  later,  upon  the  taxpayer.     Thus,  with  every 

*The  advanced  reports  of  the  railways  for  the  year  1909-10  show  that,  under 
the  economical  administration  of  the  Hon.  J.  A.  Millar,  there  was  no  deficit,  the 
"  net  profit  "  being  3.78  per  cent.,  or  slightly  more  than  the  average  rate  of  interest 
on  the  public  debt. 


RAILWAY  FINANCE  93 

extension  of  governmental  activity,  taxes  would  increase, 
while  property  subject  to  taxation  would  relatively 
decrease,  and  the  burden  would  grow  until  it  could  no 
longer  be  borne.  Then  it  would  be  clearly  seen  that  the 
principles  of  sound  private  and  public  finance  are 
essentially  the  same,  and  that  a  profit  on  public  under- 
takings, the  difference  between  revenue  and  expenditure, 
stands  for  a  balance  or  excess  of  social  utility  over  social 
cost. 


CHAPTER  VI 

THE    PUBLIC   DEBT 

The  most  striking  fact  connected  with  the  financial 
affairs  of  New  Zealand  and  the  Australasian  States  is 
the  enormous  size  of  their  public  debts. 
Large  Public  The  net  public  debt  of  New  South  Wales 
Debts  per  head  of  the  population  is  £55  ($267) ; 

that  of  Victoria  is  £42  ($204) ;  and  the 
net  debt  of  New  Zealand  is  £67,781,000  ($329,000,000), 
or  £70  ($340)  per  head  of  the  European  population. 
(Year-Book,  1909,  p.  607.)  Compared  with  these  figures 
the  debts  of  most  of  the  other  countries  of  the  world  are 
very  small.  The  net  debt  of  the  United  States,  on  July  i , 
1907,  was  only  $878,596,755  (£180,000,000),  or  about 
$10  (£2)  per  head.  If  the  debt  of  the  United  States  were 
relatively  as  great  as  that  of  New  Zealand  it  would 
amount  to  about  $30,000,000  (£6,000,000).  Canada 
has  a  debt  of  about  $42  (£8)  per  head ;  Great  Britain, 
$80  (£16);  France,  $145  (£30).  (Statesman's  Year- 
Book,  1908.) 

But  a  mere  comparison  of  per  capita  debts  of  various 
countries  gives  a  very  inadequate  idea  of  the  real  burden 
which  they  have  to  bear,  and  is  by  no  means  fair  to 
Australia  and  New  Zealand.  The  debts  of  European 
countries  have  been  for  the  most  part  incurred  in  time  of 
war,  for  necessary  but  unproductive  expenditure,  whereas 
a  very  large  part  of  the  debts  of  Australia  and  New 
Zealand  has  been  contracted  for  the  building  of  railways 
and  other  productive  or  semi-productive  investments. 
The  following  analysis  of  the  gross  public  debt  of  New 

94 


THE  PUBLIC   DEBT  95 

Zealand,  as  it  stood  on  March  31,  1909,  shows  approxi- 
mately the  amounts  raised  or  voted  under  various 
heads.     (Year-Book,  1909,  J.  605.) 

On  31st  March,  1909. 

(a.)  Services  —  £ 

Railways 23,305,000 

Roads,  bridges,  and  lands  improvement 6,456,000 

Public  works  and  buildings 4,983,000 

Immigration 2,446,000 

Maori  war 2,360,000 

Land-purchases 2,249,000 

Defence i  ,955,000 

Telegraphs 1,317,000 

Goldficlds  and  coal-mines 839,000 

Lighthouses  and  harbours 557,000 

State  coal-mines 100,000 

Tourist  and  health  resorts 117,000 

Scenery-preservation 30,000 

State  fire  insurance 2,000 

(b.)  Investments  — 

Purchase  of  land  for  settlements 6,101,000 

Advances   to   settlers 5,159,000 

Loans  to  local  bodies 3,131,000 

Bank  of  New  Zealand  preference  shares 500,000 

New  Zealand  Consols 478,000 

Advances  to  workers 328,000 

Reserve  fund  securities 800,000 

(c.)  Other  — 

Deficiencies   in    revenue,   charges   and    expenses   of 
raising  loans,  provincial  liabilities,  and  miscella- 
neous expenditure 7,725,500 


Total £70,938,534 

Of  the  gross  debt,  as  shown  here,  £16,500,000  repre- 
sents  investments   that   are  directly   productive,    from 
which    the    full    amount    of    interest    is 
recovered,  and  which,  therefore,  are  no      Productive 
burden    on     the    taxpayers.       To    this      Assets 
amount  may  be  added  the  railway  debt  of 
£23,305,000;     for,  although  the  railways  do  not  earn  the 
full  interest  on  their  capital  cost,  they  do  earn  the  full 
interest  on  the  railway  debt,  if  w'e  waive  the  contention 


96     STATE  SOCIALISM  IN  NEW  ZEALAND 

of  many  critics  that  there  ought  to  be  an  allowance  for 
depreciation,  or  that  part,  at  least,  of  "  additions  to 
open  lines  "  should  be  charged  to  revenue.  Of  the 
remaining  debt,  perhaps  £2,800,000  may  be  regarded  as 
directly  productive,  since  the  Post  and  Telegraph  De- 
partment earned,  in  the  year  1908-09,  a  net  revenue  of 
£106,342,  which  was  available  for  interest  payments. 
(Annual  Report  of  the  Post  and  Telegraph  Department, 
1909.)  To  this  should  further  be  added  the  accumulated 
sinking  fund,  amounting  to  £3,156,989.  There  is,  then,  a 
total  of  about  £45,000,000  of  directly  productive  assets, 
leaving  a  net  debt  of  about  £25,000,000  ($125,000,000), 
or  £25  (I125)  per  head,  the  interest  on  which  must  be 
paid  out  of  taxes. 

This  is  still  a  very  large  debt,  involving  an  annual 
expenditure  for  interest  of  about  £925,000  ($4,600,000) ; 
but  much  of  the  money  was  borrowed 
Loans  for  for  roads  and  bridges  and  other  public 

Development  works,  which,  although  not  directly 
productive  of  revenue,  have  greatly 
furthered  the  development  of  the  country.  Against  the 
net  debt,  as  thus  estimated,  the  Government  has  a  large 
asset  in  the  crown  lands,  valued  at  £21,511,653  (Year- 
Book,  1909,  p.  543),  but  derives  from  them  no  contribu- 
tion to  the  annual  burden  of  interest,  for  the  territorial 
revenue  is  exceeded  by  the  territorial  expenditure. 
Unfortunately,  too,  the  proceeds  of  land  sales  are  turned 
into  the  Consolidated  Fund  as  ordinary  revenue  and 
spent  from  year  to  year,  although  some  of  the  land  has 
been  bought  from  the  Maoris  with  borrowed  money. 
The  public  domain,  then,  is  a  vanishing  asset,  while  the 
public  debt  goes  on  increasing  and  there  is  no  provision 
for  ultimate  payment. 

But   the   greatest   asset    that   a   country   can    have 


THE  PUBLIC   DEBT  97 

is  a  large  and  prosperous  population,  and,  since  the  power 
to  tax  is  unlimited,  it  matters  little 
whether  the  Government  has  a  public  Debt  and 
domain  yielding  rent,  or  a  rich  territory  Prosperity 
in  private  hands  yielding  taxes.  Certain- 
ly, the  net  debt  is  small  in  comparison  with  the  total 
private  wealth  of  the  Dominion,  which  in  1906  was 
estimated  at  £304,654,000,  being  £335  ($1,628)  per 
head  of  the  total  population — a  greater  per-capita  wealth 
than  that  of  any  other  country  in  the  world,  although 
the  per-capita  wealth  of  the  Northern  states  of  the  Union 
is  probably  greater  than  this.  Many  people  in  New 
Zealand,  however,  both  rich  and  poor,  are  heavily  in  debt. 
On  March  31,  1907,  the  amount  of  loans  secured  by 
mortgage  was  £59,097,070.  The  local  governing  bodies, 
too,  have  a  gross  debt  of  £14,223,417,  some  of  which  was 
borrowed  from  the  general  Government  and  forms  part 
of  the  public  debt.  (Year-Book,  1909,  p.  198.)  The 
people  of  New  Zealand,  both  in  their  public  and  their 
private  capacity,  are  heavy  borrowers;  but  their  assets 
greatly  exceed  their  liabilities,  and,  unless  a  period  of 
crisis  and  liquidation  should  come,  they  will  have  no 
serious  trouble  in  meeting  all  their  obligations  and 
securing  the  profits  that  come  to  the  judicious  borrower 
in  a  time  of  rising  prices. 

In  so  far  as  the  burden  of  the  debt  is  concerned,  the 
financial  condition  is  better  than  it  was  in  1870,  when 
Sir  Julius  Vogel  promulgated  his  cele- 
brated  public   works   policy.     At   that       ^      ,.  . 

,  ,  1-       ,  ,  1         t  Condition 

time   the   public  debt   was  only  about        improving 

£8,000,000,  but  the  population  was  only 
250,000  and  the  people  were  by  no  means  so  prosperous  as 
they  are  to-day.     Moreover,  there  were  practically  no 
productive  assets,  a  large  part  of  the  debt  having  been 


98     STATE  SOCIALISM  IN  NEW  ZEALAND 

incurred  for  carrying  on  the  Maori  war,  for  roads  and  for 
other  expenditure  not  directly  productive  of  revenue. 
The  net  debt  at  that  time  may  be  taken  at  about  £32 
($160)  per  capita,  as  compared  with  £25  ($125)  at  the 
present  time.  Also,  the  burden  of  interest  was  about 
£1,  125.  ($8)  per  capita;  now  it  is  about  £i  ($5.) 

The  Government  was  in  a  bad  way  in  1870,  but  the 
approaching  crisis  was  probably  averted  or  postponed 
by    the    daring,    not    to    say    reckless. 
Inflation  and        policy   of   Vogel.      For    the    next   eight 
Crisis  or  nine  years  the  Colony  lived  on  bor- 

rowed money.  The  public  debt  rose 
to  £24,000,000;  private  borrowing  was  on  a  still  larger 
scale;  and  there  was  a  tremendous  boom  in  land  values, 
while  the  price  of  wool  was  slowly  falling.  Then  came 
the  crisis  of  1879,  the  natural  result  of  a  period  of  exces- 
sive borrowing  and  inflation.  The  Colony  did  not  fully 
recover  from  this  crisis  until  about  the  year  1896,  when  a 
period  of  prosperity  ensued,  lasting  without  interruption 
until  the  winter  of  1908. 

The  next  twelve  years  (1879-1891)  were  a  period  of 
liquidation,  comparative  economy,  and  slow  but  steady 
growth     and     recuperation.       Notwith- 
Period  of  standing  the  depression  that  prevailed, 

Depression  the  population  of   the  colony  increased 

by  36  per  cent.  In  the  succeeding  twelve 
years  (1891-1903)  it  increased  by  only  30  per  cent.  During 
the  eight  years  covered  by  the  administrations  of  Atkinson 
and  Stout  (1883-91)  only  about  £8,000,000  was  added 
to  the  public  debt.  The  efTort  to  live  upon  income  rather 
than  loans  was  good  for  the  Government  and  for  private 
citizens  as  well,  and  a  solid  foundation  was  laid  for  the 
extraordinary  properity  of  the  time  of  Seddon.  Besides, 
new  resources  were  developed,  particularly  the  meat- 


THE  PUBLIC  DEBT  99 

freezing  industry.  The  first  shipment  of  frozen  mutton 
was  made  on  February  15,  1882,  but  it  was  not  until 
1890  that  the  value  of  the  meat  exported  exceeded 
£1,000,000.  In  1907  it  was  valued  at  £3,420,664,  or 
about  17  per  cent,  of  the  total  value  of  the  exports  of  the 
Dominion.  Much  of  the  prosperity  of  recent  years 
has  been  due  to  the  development  of  this  one  industry. 
The  total  exports  for  the  year  1890  were  valued  at 
£9,428,761,  a  figure  not  reached  again  until  1897,  when 
the  total  exports  were  valued  at  £9,596,267,  after  which 
they  increased  by  leaps  and  bounds,  reaching  the  enor- 
mous value  of  £19,783,138  in  the  year  1907. 

The  election  of  December  5,  1890,  the  first  under  a 
practical  manhood  suffrage,  marks  the  end  of  the  domina- 
tion of  the  large  landholders  and  the  rise 
of  a  thoroughgoing  democracy  consisting  „**  *  ]^^ 

,    •     n  r      1  1    •  1  r      1  ReVOlUtiOU 

chieny  01  the  warkmg  class  or  the  towns,  ^^  jg^^j 

the  small   shopkeepers,    and   the  small 

farmers. 

The  leader  of  the  new  democracy  was  the  Hon.  John 

Ballance,  who  became  premier  January  24,  1891.     The 

premier  died  on  April  27,  1893,  and  on 

May    I    was    succeeded    by    the    Hon.  ,   ^.  ,  ^. 

■'  ...  Legislation 

Richard    J.    Seddon,    who   remamed    m  after  1890 

power  until  his  death  on  June  10,  1906. 
He  was  succeeded  by  the  Hon.  W.  Hall-Jones,  who  re- 
mained in  office  for  a  few  weeks.  The  present  premier.  Sir 
Joseph  Ward,  took  office  on  August  6,  1906.  During  this 
period  of  democratic  rule  a  large  number  of  Acts  were 
passed  for  the  benefit  of  the  classes  in  control  of  the 
Government.  Some  of  these  Acts  did  not  involve  any 
increase  in  the  public  debt ;  others  involved  the  borrow- 
ing of  large  sums.  The  following  table  shows  the  increase 
of  the  gross  public  debt  since  March  31,  1891,  and  the 


100     STATE  SOCIALISM  IN  NEW  ZEALAND 

chief   items   of   expenditure    from    loans:      (Year-Book, 

1909,  p.  600.) 

£ 

Gross  public  debt,  31st  March,  1909 70.938,534 

31st  March,  1 891 38,830,350 

Increase £32,108,184 

£ 

Native-land  purchases 765,675 

Land-settlement  (including  Cheviot) 6,101,541 

Loans  to  local  bodies 2,853,100 

Lands  improvement 500,000 

Advances  to  settlers 5,158,800 

Advances  to  workers 328,500 

Bank  of  N.  Z.  preference  shares 500,000 

N.  Z.  Consols 478,573 

District  railways 47,000 

Public  works 13,438,750 

Purchase  Wellington-Manawatu  Railway.  .  1,000,000 

Increase  by  conversions  and  redemptions.  .  828,017 

.'^inking  fund  accretions 1,777,000 

Naval  and  military  settlers 27,226 

Advances  to  dairy  companies .1.781 

State  fire  insurance 140,000 

Scenery-preservation 30,000 

Reserve  Fund  securities , 800,000 

34.777.963 

Less  Redemptions  — 

Consolidated  Stock  Act,  1884,  deben- 
tures        1 ,384,420 

Other  debentures 1.285,359 

2,669,779 

Total  net  increase £32,108,184 

While  the  public  debt  has  increased  during  this  period 
by  an  enormous  sum,  by  far  the  greater  part  has  been 
put  into  directly  productive  investments, 
Decreased  ^^^^  ^^  which  earn  the  full  amount  of 

Burden  of  Inter-  ,  ,     ,  .     ,  ttt-  1    .,.1 

est  Payment         mterest  on  their  capital  cost.     VVitn  the 

development  of  the  country  the  revenue 
of  the  Government  has  greatly  increased  and  its  financial 
condition  has  improved.  Although  the  debt  per  capita 
has  increased,  the  annual  interest  payments  per  capita 


THE  PUBLIC   DEBT  loi 

have  fallen,  because  of  the  fall  in  the  rate  of  interest. 
Also,  the  annual  interest  payments,  which  in  the  year 
1891-92  absorbed  43  per  cent,  of  the  total  revenue  of  the 
consolidated  Fund,  in  the  year  1908-09  absorbed  only 
24  per  cent,  of  that  revenue. 

But  it  should  not  be  forgotten  that  this  improvement 
has  taken  place  in  a  time  of  rising  prices  of  wool,  meat, 
dairy  produce,  and  other  exports,  and 
that  a  policy  of  borrowing,  while  usually     Dangers  of 
successful  in   times  of  prosperity,   may     Borrowing 
become  a  source  of  grave  danger  in  the 
event  of  crisis  and  industrial  depression.     It  is  quite 
conceivable  that  the  railways  and  other  investments, 
which  now  provide  a  large  part  of  the  interest  on  their 
cost,  may  become  less  productive  and  throw  a  greater 
burden  upon  the  taxpayers  when  their  ability  to  pay  is 
materially  decreased.     The  most  profitable  enterprises 
in  which  the  Government  is  engaged  do  little  more  than 
pay  their  way.     They  have  no  considerable  margin  of 
profit  or  surplus  which  could  be  used  in  case  of  emer- 
gency, no  buffer  to  receive  the  shock  of  loss,  which  must 
fall  directly  upon  the  taxpayers  or  come  out  of  loans 
which  might  be  hard  to  negotiate. 

The  extensive  borrowing  of  recent  years  has  probably 

caused  a  good  deal  of  inflation,  especially  in  land  values. 

The    unimproved    value    of    land    was 

estimated   at   £84,401,244   in    1897;    in     '^^^  f*'^^"" 

r,  ^        ^r  1-        ment  s   Credit 

1909    It    was    £172,759,948.      Yet    this     ^^^^ 

amount     is    not   vastly     in     excess     of 

the  combined   funded  debt,  public  and  private,  and  a 

marked  decline  in  the  prices  of  the  great  staples,  wool 

and  meat,  might  cause  serious  trouble.    But  the  holders 

of  governmental  securities  are   perfectly  safe,  for  they 

have  a  prior  lien  on  all  the  resources  of  the  Dominion. 


102     STATE  SOCIALISM  IN  NEW  ZEALAND 

The  Government,  therefore,  has  little  difficulty  in  bor- 
rowing large  sums  every  year  at  from  33/2  to  4  per  cent. 
A  large  part  of  the  loans  of  1908-09  were  issued  on 
debentures  at  3}^  per  cent,  interest,  and  were  floated  at 
about  par.  Usually,  4  per  cent,  debentures  are  floated 
at  a  slight  premium,  and  3}^  per  cent,  debentures  at  a 
discount.    (New  Zealand  Budget,  1909.) 

Strong  objections  are  urged  against  the  Government's 
borrowing  in  the  local  market  and  thus  making  it  harder 
for  people  to  borrow  for  ordinary  purposes.  The  Govern- 
ment generally  borrows  in  England ;  sometimes  in  Aus- 
tralia ;  and  lends  far  more  than  it  borrows  in  New  Zealand. 
There  is  a  good  deal  of  local  capital  available  for  gilt- 
edged  loans  at  low  rates  of  interest,  and  it  is  said  that  of 
late  years  New  Zealand  capital  has  been  sent  abroad  for 
investment,  to  Queensland  and  other  new  fields  of  enter- 
prise.     (Xhe  Evening    Post,    Wellington,    October    14, 

1909) 

Although  the  public  debt  is  increasing  all  the  time, 
and  must  go  on  increasing,  the  Government  has  main- 
tained a  sinking  fund  for  many  years. 
The  Sinking         In  1 909  it  amounted  to  £3,156,989,  and 
Fund  was   mostly   invested    in    New  Zealand 

securities  of  various  kinds.  The  advis- 
ability of  maintaining  such  a  fund  has  often  been  ques- 
tioned.    Mr.  William  Eraser  said  in  the  House: 

"  I  do  not  think  there  is  any  use  whatever  in  a  Colony  which  is 
continuing  to  borrow  to  pretend  to  build  up  a  sinking  fund  when  we 
know  perfectly  well  that,  directly  or  indirectly,  the  money  we  are 
setting  apart  is  derived  from  borrowed  money."  (Parliamentary 
Debates,  Vol.  139,  p.  578.) 

But  Mr.  Massey,  the  leader  of  the  opposition,  de- 
fends the  sinking  fund: 

"  In  order  to  show  our  creditors  that  we  intend  to  meet  our 
obligations  at  the  due  date  there  should  be  something  in  the  way  of  a 
sinking  fund."     (Ibid,  p.  546.) 


THE  PUBLIC  DEBT  103 

The  sinking  fund,  too,  has  been  found  useful  in  the 
raising  of  loans,  especially  when  it  could  be  temporarily 
hypothecated  as  a  sort  of  collateral  security,  (Parlia- 
mentary Debates,  Vol.  140,  p.  130.)  It  is  like  a  sub- 
stantial balance  in  the  bank,  useful  for  many  purposes, 
though  not  intended,  as  its  name  might  imply,  to  secure 
the  ultimate  payment  of  the  public  debt.  It  has  not 
always  been  used  for  legitimate  purposes,  but  latterly 
its  integrity  has  been  respected;  it  has  been  greatly 
augmented,  both  from  loans  and  revenue;  and  now 
forms  an  important  part  of  the  financial  system.  In  a 
recent  speech  Sir  Joseph  Ward  said  that  he  would  soon 
propose  a  comprehensive  scheme  for  the  liquidation  of 
the  entire  debt  at  the  end  of  75  years.  (Speech  of  Sir 
Joseph  Ward  at  Winton,  May  5,  1910.) 

Meanwhile  the  public  debt  is  increasing  from  year  to 

year.    The  increase  for  the  year  1908-09  was  £4,484,637. 

Speaking  of  the  increase  in  the  public 

debt  since  the  Liberal  Party  came  into  ^w  .  ^  ,  •  ^ 

■'  Debt  Increasing 

power.  Sir  Joseph  Ward  says : 

"  The  whole  of  the  increase  in  the  pubHc  debt  has  been  used  in 
directly  reproductive  objects,  producing  a  profit  in  addition,  and  the 
expenditure  on  unreproductive  objects,  such  as  roads,  bridges,  mines, 
pubHc  buildings,  tourist,  health,  etc.,  have  been  provided  out  of  reve- 
nue."    (Budget,  1909,  p.  2.) 

While  this  may  be  a  somewhat  optimistic  statement, 
in  view  of  the  fact  that  the  railway  deficit  for  1908-09  was 
£212,000,  and  the  net  profits  on  advances 
to    settlers    and     other    governmental  Earning  Power 
,,  ,        ^  of  Government 

enterprises,   accordmg    to    the    Govern-  investments 

ment's    own    showing,    were    less    than 
£200,000,  it  is  certain  that  the  increase  in  the  public  debt 
since  1891  is  represented  by  assets  which  earn  or  might 
earn  the  full  interest  on  their  capital  cost,  and  could  be 
sold,  if  necessary,  for  a  sum  large  enough  to  pay  the 


104     STATE  SOCIALISIM  IN  NEW  ZEALAND 

full  amount  of  the  new  debt.  It  should  be  noted  that  the 
total  sum  invested  in  these  enterprises,  including  the 
railways,  is  greater  than  the  amount  of  the  debt  incurred, 
for  contributions  have  been  made  from  the  general  reve- 
nue through  the  Public  Works  Fund,  and  deficits  also 
have  been  made  up  out  of  revenue,  so  that  it  is  difficult, 
if  not  impossible  to  discover  the  real  capital  cost.  The 
governmental  enterprises,  taken  as  a  whole,  ha\e  not 
earned  anything  like  the  full  interest  on  their  capital 
cost,  but  do  now  earn  very  nearly  the  full  interest  on  the 
debt  incurred  in  establishing  them,  and  should  earn 
much  more  than  this  in  the  near  future,  if  the  financial 
administration  of  the  Government  can  be  divorced  from 
politics. 

The  Public  Works  Fund  is  derived  chiefly  from  loans, 
but  partly  from  taxation,  since  a  large  sum  is  transferred 
every  year  from  the  Consolidated  Fund. 
The  Public  In  the  year  1908-09,  the  Public  Works 

Works  Fund  Fund  received  £800,000  from  this  source, 
and  from  1 891  to  1909,  the  sum  of 
£7,230,000  was  thus  transferred,  which  was  expended 
chiefly  on  roads  and  public  buildings  but  partly  in  the 
creation  of  productive  assets.  In  the  financial  year, 
ending  March  31,  1909,  the  sum  of  £3,363,895  was  spent 
out  of  the  Public  Works  Fund,  and  the  expenditure  was 
distributed  as  follows:  (Public  Works  Statement, 
1909,  p.  2.) 

Expenditure  on  Services:  — 

Public  Works  Fund  —  ^  £  £ 

Railway  construction  and  improvement     1,356,996 
Purchase  Wellington-Manawatu   Rail- 

^^ay 933.759 

Roads 469,548 

Public   buildings 285,521 

Telegraph-extension 163,033 

Lighthouses,   harbour-works,   and   har- 
bour-defences   19.217 


THE  PUBLIC  DEBT  105 

£  £ 

Immigration 1 5,077 

Tourist  and  health  resorts 24,285 

Development  of  goldfields 32,859 

Contingent  defence 10,766 

Lands    improvement 19.542 

Purchase  of  Native  lands 2,099 

Rates  on  Native  lands '. .  27 

Public  Workb  departmental  expensos.  . .         24,512 
Charges  and  expenses  of  raising  loans.  .  6,654 

3.363.895 

Carried  forward 3.363.895 

In  this  table  it  can  readily  be  seen  that  the  total 
expenditure  for  roads,  public  buildings  and  other  unpro- 
ductive services  considerably  exceed  the  contribution 
of  £800,000  from  the  Consolidated  Fund.  But  the 
year  1908-09  was  exceptional,  for  the  Government  does 
not  usually  borrow  for  unproductive  expenditure,  unless 
part  of  the  money  spent  in  improving  open  lines  of  rail- 
way may  be  regarded  as  unproductive.  However,  if  the 
cost  of  roads,  public  buildings,  and  the  like,  were  charged 
directly  to  revenue,  instead  of  being  first  transferred  to 
the  Public  Works  Fund,  there  would  be  little  or  no  sur- 
plus, and  the  Government,  for  obvious  reasons,  prefers 
to  show  a  surplus.  (Public  Works  Statement,  1909, 
Tables  1-8.) 

Members  of  the  opposition  and  other  critics  of  the 
Government  take  pleasure  in  scoffing  at  the  surplus, 
and  with  reason.  In  the  debate  on 
the  Budget  for  1908,  Mr.  Fisher  said:  The  Surplus 
"  It  is  extraordinary  that  the  country 
should  borrow  £1,000,000  and  end  the  year  with  a 
surplus  of  £700,000."  Mr.  James  Allen  is  reported  as 
saying: 

"  The  Public  Works  Fund  was  called  upon  to  find  money  for 
services  that  in  previous  years  had  been  charged,  and  rightly  charged, 


io6     STATE  SOCIALISM  IN  NEW  ZEALAND 

to  the  Consolidated  Fund  ,  .  .  the  object  having  no  doubt  been 
to  make  it  appear  that  there  was  a  larger  surplus  than  really  existed." 
(Evening  Post,  July  13,  1907.) 

Mr.  Laurenson  is  reported  to  have  said  in  the  same 

interview : 

"  To  a  very  large  extent  I  agree  with  the  writer  [Nemesis]  that 
there  should  be  a  more  strict  allocation  of  borrowed  money  in  the 
direction  of  investment  in  reproductive  works,  and  in  reproductive 
works  only.  During  a  period  of  high  national  prosperity  such  as  we 
are  passing  through  at  present,  I  believe  the  Government  would  be 
justified  in  raising  more  money  by  way  of  taxation  and  less  by  way 
of  loans,  because  one  cannot  help  having  an  uneasy  feeling  that  if 
bad  times  strike  us  we  shall  then  not  only  be  short  of  money  our- 
selves, but,  having  taken  full  advantage  of  the  money  market  during 
times  of  prosperity,  we  shall  be  unable  to  approach  it  successfully  in 
the  day  of  adversity."     {Evening  Post,  July  13,  1907.) 

Mr.  Massey,  the  leader  of  the  opposition,  said  in 
the  House: 

"  These  charges  simplv  cannot  be  defended. 

Questionable         why  are  they   so  charged?     Simply   to  enable 

Charge  to  the  Government  to  show  a  huge  surplus  at  the 

Capital  Account  ^""^    o^    the    year."       (Parliamentary    Debates, 

Vol.  139,  p.  553,  July  23,  1907.) 

The  writer  of  a  series  of  articles  in  the  Evening 
Post  says: 

"  In  business,  charges  such  as  these  would  only  be  charged  to 
capital  by  weak  and  struggling  concerns  existing  on  a  bolstered 
balance  sheet."  {Evening  Post,  October  6,  1909;  article  by  "  Neme- 
sis.") 

A  more  conservative  writer  makes  the  following  state- 
ment: 

"It  would  no  doubt  be  better,  and  the  Government  would  be 
on  firmer  ground,  if  revenue  did  not  make  quite  so  large  a  contribu- 
tion to  the  Public  Works  Fund,  and  if,  instead  of  doing  that,  it  had 
charged  upon  it  all  items  of  a  doubtful  character,  such  as  public  build- 
ings for  ordinary  governmental  and  not  for  revenue-producing  pur- 
poses. In  Australia  new  buildings,  such  as  courthouses,  police  sta- 
tions, hospitals,  and  schools,  are  charged  to  revenue,  and  New  South 
Wales  similarly  treats  the  cost  of  post-offices."  {Evening  Post,  July 
10,  1907,  article  by  "  Senex  et  Juvenis.") 

Most  of  the  financial  critics  appear  to  ignore  the  fact 


THE  PUBLIC  DEBT  107 

that  the  PubHc  Works  Fund  usually  derives  more  from 

revenue  than  is  spent  in  an  unproductive 

way,    and    that   the    Government    now      A  Question 

spends  all  the  money  it  borrows,   and      of  Accounting 

more    besides,    on     productive    works. 

The  question  is  largely  one  of  correct  accounting,  and 

there  can  be  little  doubt  that  there  is  room  for  reform  in 

this  regard.    The  discussion  is  well  summed  up  by  Mr. 

J.  C.  Thomson,  who  says: 

"  Even  supposing  that  this  reform  is  only  a  matter  of  book- 
keeping, it  would  be  far  better  to  charge  all  the  current  expendi- 
ture to  the  consolidated  revenue,  and  although  the  surplul  might 
be  smaller,  at  the  same  time  it  would  be  putting  the  correct  posi- 
tion before  the  country.  It  is  better  to  know  one's  true  position 
than  to  live  in  a  fool's  paradise."  (Parliamentary  Debates,  Vol. 
139,  p.  604,  July  24,  1907.) 

The  severe  and  sometimes  unjust  criticism  to  which 
the  Government  has  been  subjected  has  had  a  good  effect, 
and  reforms  in  the  system  of  accounting  are  likely  to  be 
introduced  which  will  result  in  economies  in  expenditure 
and  will  present  to  the  people,  or,  at  least,  to  those  who 
take  an  interest  in  such  matters,  clear  statements  of  the 
finances  of  every  department,  so  that  there  may  be  no 
question  as  to  the  financial  success  or  failure  of  the 
important  enterprises  undertaken  by  the  Government. 
(Budget,  1909,  p.  16.) 

But  whether  derived  from  revenue  or  from  loans,  or 
whether  expended  for  productive  or  unproductive  pur- 
poses, an  enormous  sum  is  spent  every 

year  out  of   the   Public  Works   Fund,      .^^   I,  ... 
^  .  the   Public 

and  the  question  as  to  the  proper  dis-  works  Fund 
tribution  of  this  expenditure  is  of  the 
greatest  concern  to  the  people  of  the  Dominion.  During 
the  year  1908-09  the  disbursements  totalled  £3.363.895 
($16,300,000)  (Public  Works  Statement,  1909,  p.  2),  ap- 
portioned as  shown  above.  Presumably,  the  distribu- 
tion is  made  according  to  "  needs,"  but  the  concept  of 


io8     STATE  SOCIALISM  IN  NEW  ZEALAND 

"  needs  "  is  very  vague  and  most  elastic.  The  Govern- 
ment itself  hardly  knows  what  the  Dominion  needs  in  the 
way  of  developmental  expenditure.  In  the  case  of  roads 
and  bridges,  the  greatest  need  appears  to  exist  in  the 
thinly  settled  back  blocks,  where  it  would  not  be  difficult 
to  expend  on  roads  more  than  the  improved  land  is 
likely  to  be  worth  for  years  to  come.  In  the  case  of 
districts  already  developed  it  is  not  easy  to  distinguish 
between  needs  and  wants. 

But  the  members  of  Parliament  from  every 
part  of  the  Dominion  come  to  Wellington  prepared 
to  enlighten  the  Government  as   to  the  needs  of  their 

constituents,  and  the  chief  work  of  the 
Political  Works    members  —  that,   at   least   which,    best 

secures  their  re-election  —  seems  to  be 
the  getting  of  appropriations  of  one  kind  and  another 
from  the  Public  Works  Fund.  Every  part  of  the  Domin- 
ion clamours  for  its  "  fair  "  share  of  expenditure,  and  to 
some  extent  the  apportionment  is  made  proportional 
to  the  political  influence  of  the  various  electoral  districts. 
Petitions  for  public  works  of  every  kind  are  showered 
upon  the  minister,  demanding  in  the  aggregate  far 
more  than  the  available  funds.  Most  of  the  requests, 
therefore,  must  be  denied,  but  the  Government  does  its 
best  to  be  "  fair  "  to  everybody  without  making  too 
many  enemies,  and  without  running  the  country  into 
bankruptcy,  and  the  temptation  to  augment  the  Fund 
by  further  borrowing  is  almost  irresistible. 

In  the  time  of  Seddon  the  Public  Works  Fund  was 
a  veritable  corruption  fund  and  was  confessedly  used  for 

political  purposes.     "  Nemesis  "  says: 

A  Corruption  <.  r.      j  r  4.    4.  * 

P  rroud  as  we  are  01   our  great  statesman 

"*^"  there  is  little  doubt  that  one  of  the  most  potent 

instruments  that  maintained  him  in  office  for  his 
record  period  was  the  clever  manipulation  of  this  Fund.  {Evening 
Post,  July  5,  1907.) 


THE  PUBLIC   DEBT  109 

Mr.  Seddon  himself  said  in  Parliament: 

"  I  am  not  one  of  those  who  say  that,  other  things  being  equal 
I  should  not  favour  the  district  that  was  represented  by  one  who 
helped  to  maintain  the  Government  in  power." 

At  another  time  he  said : 

"  It  is  unreasonable  and  unnatural  to  expect  the  Government 
to  look  with  the  same  kindly  eye  on  districts  returning  members 
opposed  to  the  Government  as  on  those  which  returned  Government 
supporters."     {Reformer,  Christchurch,  No.  2,  October,  1905.) 

The    older    settlements,    like    certain    parts    of    the 

South  Island,  were  naturally  served  first;  while  the  newer 

parts   had    their   turn    later;   when    the 

older  districts  began  to  develop  a  taste         Economy 

for  economy  in  expenditure  and  restric-         Demanded 

tion  of  borrowing.    But  Mr.  Seddon  was 

not  prepared  to  adopt  this  policy,  and  said  in  Parliament, 

with  even  more  than  his  usual  frankness: 

"  I  say  that  until  we  have  had  a  fair  expenditure  of  public  money 
out  of  loans  upon  each  part  of  the  Colony,  it  is  wrong  of  those  parts 
that  have  had  a  fair  share  to  say  suddenly  that  there  is  to  be  no  more 
borrowing."     (Parliamentary  Debates,  Vol.  99,  p.  291.) 

The  Ward  Government,  especially  during  the  past 

few  years,  has  taken  a  stronger  stand  than  this.     Sir 

Joseph  Ward  said  in  the  House: 

"  Members  had  only  to  look  at  the  order  paper  for  this  session 
and  what  did  they  find?  They  would  find  that  there  had  been  a 
universal  demand  from  all  sides  of  the  House  for  far  more  money 
than  the  country  could  possibly  provide.  The  Government,  if  they 
did  not  resist  this  extraordinary  demand,  would  not  be  fit  to  hold 
their  positions  on  the  treasury  benches."  (Parliamentary  Debates, 
Vol.  140,  p.  248,  August  15,  1907.) 

And  yet,  in  the  Budget  for  1908,  notwithstanding 
the  hard  times,  Sir  Joseph  Ward  pro- 
posed  for  the  ensuing  year  an  expendi-  re-e  ec  ion 
ture  of  £2,350,000  out    of    the    Public          Fulfilled 
Works  Fund.     He  said: 

"  Hon.  gentlemen  will  see  that  an  effort  has  been  made  to  do 
even-handed  justice  to  all  classes  of  the  Dominion,  and  I  trust  that 


no     STATE  SOCIALISM  IN  NEW  ZEALAND 

by  the  means  which  I  have  outlined  every  section  of  the  country  will 
be  brought  into  closer  harmony  for  the  one  great  purpose  —  namely, 
the  promotion  of  our  national  well-being  and  happiness."  (Budget, 
1908,  p.  21.) 

During  the  year  1908-09,  £3,363,895  was  spent  out 
of  the  Public  Works  Fund,  including  £933,759  for  the 
purchase  of  the  Manawatu  Railway. 

The  appropriations  were  unusually  large  because  of 
the  approaching  election  of  November,  1908,  in  which 
the  Ward  Government  was  returned  to  power,  but  with  a 
reduced  majority.  In  criticism  of  the  Public  Works 
statement.  The  Press  very  pertinently  says: 

"  One  of  the  most  regrettable  results  of  the 
Expenditure  for  system  under  which  the  general  Government 
catching  Votes  borrows  money  to  carry  on  public  works  is  that 
the  amount  of  borrowing  and  the  manner  in 
which  the  money  is  allocated,  are  determined  b}'  the  exigencies  of 
the  political  situation,  rather  than  by  the  dictates  of  economic  pru- 
dence. The  Public  Works  statement  delivered  by  Hon.  W.  Hall- 
Jones  last  evening  was  a  business-like  document,  but  the  trail  of 
the  general  election  is  over  it  all.  .  .  .  The  reckless  manner 
in  which  we  now  rely  on  ever-increasing  loans  is  all  the  more  regret- 
table when  it  is  borne  in  mind  that  a  good  deal  of  money  is  frittered 
away  in  political  works,  with  the  object  of  catching  votes,  while  a 
considerable  proportion  is  expended  in  so-called  "  additions  to  open 
lines,"  and  other  items  which  really  ought  to  be  provided  for  out  of 
revenue.  The  taxpayers  are  again  to  be  bribed  with  their  own 
money."     {Tlie  Press,  Christchurch,  September  23,  1908.) 

In  a  similar  vein  the  Evening  Post  says: 

"  Under  the  present  system  roads  and  bridges  must  continue 
to  be  the  current  coin  of  political  corruption,  and  there  is  not  the 
faintest  indication  that  the  ministers  have  any  intention  of  laying  the 
axe  at  the  root  of  this  unlovely  growth."  {Evening  Post,  September 
23,  1908.) 

The  most  common  form  of  political  corruption  in  the 
United  States,  the  corrupting  influence  of  railways  and 
other  business  corporations,  does  not  exist  to  any  great 
extent  in  New  Zealand,  because  of  the  prevalence  of 
governmental  and  municipal  ownership,  and  because 
of  the  superiority  of  the  judicial  and  administrative  sys- 
tems; but  the  concentration  of  a  large  part  of  the  eco- 
nomic power  of  the  community  in  the  hands  of  the  Gov- 


THE  PUBLIC  DEBT  in 

ernment  has  created  a  form  of  corruption  which,  while 
its  moral  evils  may  not  be  so  far  reaching,  is  far  more 
wasteful  from  the  economic  point  of  view.  That  this 
form  of  political  corruption  is  not  more  prevalent  in  the 
United  States  is  not  due  to  any  special  virtue  on  the 
part  of  American  politicians,  but  solely  to  the  fact  that 
the  Government  has  relatively  fewer  functions  to  per- 
form and  less  money  to  spend,  and  no  one  can  doubt  that 
it  would  flourish  on  American  soil  even  more  luxuriantly 
than  in  New  Zealand,  where  it  is  held  in  check  by  the 
cabinet  system,  under  which  the  budget  is  in  the  hands 
of  a  responsible  ministry,  and  not,  as  in  the  United  States, 
in  the  hands  of  relatively  irresponsible  committees. 

The  following  quotation  from  a  speech  of  Senator 
Francis  E.  Warren,  of  Wyoming,  might 
have   been     uttered     by     almost    any  J^J^.^  ^J^f^^^^^^^" 
member  of    Parliament  from  the  back  Things" 
country   of   New  Zealand : 

"  The  position  of  a  servant  of  the  people  in  Congress  is  peculiar. 
His  environment  and  surroundings  in  Washington  form  a  constant 
temptation  to  him  to  become  a  statesman,  so  called,  and  indulge  in 
large  theoretical  questions  of  Government  rather  than  engage  in  the 
real  work  of  constructive  legislation,  such  as  getting  appropria- 
tions and  various  favours  for  his  own  State,  pensions  for  its  old 
soldiers,  and  the  thousand  and  one  little  things  his  constituents 
desire.  From  the  older  eastern  and  middle  States,  where  the  local 
wants  have  long  since  been  supplied,  a  member  of  the  House  or 
Senate  can  indulge  himself  and  safely  devote  his  time  to  oratory 
and  statesmanship  with  glor\'  to  himself  and  without  damage  to  his 
constituency.  But  the  man  from  a  j-oung,  virile,  exacting  western 
State,  with  pressing  local  needs,  must  spend  his  days,  nights,  and 
Sundays  in  hard,  continuous,  grinding  work  for  his  people,  if  he 
expects  to  win,  doing  the  less  glorious  but  more  satisfactory'  duty  of 
getting  things."     {Denver  Republican,  June  26,  1908.) 

There  can  be  no  doubt  that  the  Government  of  New 
Zealand  has  done  much  to  foster  the  industries  of  the 
Dominion,  and  that  economic  develop- 
ment  has   been    greatly   stimulated   by  Extravagance 
expenditure  of  vast  sums  of  borrowed  in  Expenditure 
money;  but  it  seems  probable  that  too 


112     STATE  SOCIALISM  IN  NEW  ZEALAND 

much  has  been  borrowed  and  that  there  has  been  a  good 
deal  of  misdirection  and  waste  in  expenditure.  The  ease 
with  which  the  Government  has  been  able  to  borrow  has 
been  a  temptation  to  extravagance  which  it  has  been 
unable  to  resist.     The  Bulletin  says: 

"  The  Dominion  has  been  enjoying  a  fictitious  prosperity;  land 
and  property  values  have  been  artificial;  nearly  everything  has 
been  artificial."     {Bulletin,  Sydney,  N.  S.  W.,  May  28,  1908.) 

Perhaps  this  is  an  extreme  statement,  for  The  Bulletin 
makes  a  special  effort  to  check  the  Australian  states  and 
New  Zealand  in  their  career  of  borrowing,  but  the 
Dominion  has  certainly  been  living  quite  largely  on 
borrowed  money,  has  been  very  optimistic  with  regard  to 
the  future,  and  much  inclined  to  shift  the  burden  of  devel- 
opment to  shoulders  of  posterity.  True,  posterity  may  be 
well  able  to  bear  the  burden,  especially  since  a  large  part 
of  the  interest,  if  not  the  whole  of  it,  will  be  provided  by 
the  various  enterprises  in  which  the  Government  is 
engaged,  but  it  is  possible  that  the  earning  power  of  these 
enterprises,  at  no  time  great,  may  be  reduced;  that  the 
prices  of  wool,  mutton,  and  dairy  produce  may  fall,  and 
that  it  may  be  increasingly  difficult  for  the  Government 
to  effect  loans.  If  any  or  all  of  these  possibilities  are 
realized,  the  position  of  the  Government  will  be  unfor- 
tunate, for  it  is  sailing  very  close  to  the  wind,  carrying 
much  sail  and  little  ballast,  counting  on  fair  weather  and 
not  well  prepared  for  storms. 

However,  the  Government  seems  to  have  success- 
fully weathered  the  crisis  which  began  in  the  winter  of 
1908  and  continued  through  the  winter 
1908-9  ^^  1909.    Although  the  exports  fell  from 

£19.783,530  in  1907  to  £15,894,530  in 
1908,  the  value  of  the  imports  increased  from  £16,539,707 
to  £17,247,162,  and  the  revenue  from  customs  duties  was 


THE  PUBLIC  DEBT  113 

well  maintained,  notwithstanding  considerable  reduc- 
tions in  duties  granted  by  the  tariff  Act  of  1907.  The 
land  and  income  taxes  were  more  productive  in  1908-09 
than  in  1907-08,  also  the  beer  duty  and  income  from 
stamps,  so  that  there  was  only  a  slight  falling  off  in 
revenue.  On  the  other  hand,  the  expenditure  from  the 
Consolidated  Fund  increased  by  over  £500,000  ($2,000,- 
000),  so  that  the  surplus  of  £767,849  of  the  previous  year 
was  reduced  to  £184,321  on  March  31,  1909.  Although 
the  Government  advanced  to  settlers  •  and  workers  a 
larger  sum  than  ever  before,  it  could  not  supply  the  de- 
mand for  loans,  and  loans  from  private  lenders  were 
hard  to  obtain. 

It  is  probable  that  the  crisis  would  have  been  far 
more  serious  had  the  Government  not  been  able  to  borrow 
large  sums  on  favourable  terms  for  loans 

to  settlers  and  workers  and  for  keeping  ,     „     ^. 

,.  by  Further 

up  even  more  than  the  usual  expenditure  Borrowing 

on  public  works.    Sir  Joseph  Ward  says, 

in  the  Budget  of  1909: 

"It  is  difficult  to  conceive  what  would  have  been  the  state  of 
things  during  the  past  twelve  months  if  the  Advances  to  Settlers 
Department  had  not  been  in  existence." 

Disaster  seems  to  have  been  averted  by  further 
borrowing,  and  one  is  strongly  reminded  of  the  financial 
situation  in  the  early  seventies,  when  the  approaching 
crisis  was  postponed  by  the  extensive  borrowing  and 
expenditure  inaugurated  by  Vogel. 

But  the  general  financial  outlook  seems  to  be  better 
than  it  was  in  the  time  of  Vogel.    The  buoyancy  of  the 
wool  market  has  carried  the  Dominion 
well  out  of  danger  and  there  are  good  Optimism  of 
prospects  of  rising  prices  of  mutton  and  the  Government 
dairy  produce  for  some  time  to  come. 
Then,  too,  private  wealth  is  increasing  as  the  country 


114     STATE  SOCIALISM  IN  NEW  ZEALAND 

developes.  In  the  Budget  of  1909,  Sir  Joseph  Ward  makes 
an  extraordinary  estimate  of  private  wealth,  claiming 
that  it  is  equal  to  £768  ($3,700)  per  head  of  the  mean 
population.  While  this  estimate  is  much  exaggerated,  be- 
ing at  variance  with  all  previous  calculations,  there  can 
be  no  doubt  that  the  private  wealth  of  the  Dominion  is  far 
greater  than  the  amount  of  the  public  debt,  and  that 
the  danger  of  bankruptcy,  which  some  have  predicted,  is 
very  remote  indeed.  Sir  Joseph  Ward  rises  to  a  veritable 
paean  of  triumph  when  he  says: 

"  These  figures  and  facts  prove  that  although  the  pubHc  debt 
has  increased  by  the  amount  I  have  stated,  the  assets  in  the  rapid 
development  of  the  country  have  increased  in  a  vastly  greater  ratio: 
for  every  £1,000,000  increase  in  the  public  debt  the  assets  have  in- 
creased by  fully  £10,000,000.  This  in  commercial  circles  would  be 
considered  very  sound  business."     (Budget,  1909,  p.  3.) 

And  yet,  the  financial  stress  through  w^hich  the 
Dominion  has  passed  has  taught  the  wisdom  of  caution 
_  in  borrowing  and  economy  in  expendi- 

ture.   Sir  Joseph  Ward  himself  says: 

"  I  do  not  think  it  wise  for  this  country  to  continue  borrowing 
annually  for  public  works  to  the  extent  that  it  has  been  doing." 
(Budget,  1909,  p.  31.) 

In  the  winter  of  1909  the  Government  inaugurated 
a  scheme  of  retrenchment  in  the  civil  service  which,  Sir 
Joseph  Ward  said,  "will  effect  a  total  saving  exceeding 
a  quarter  of  a  million  sterling,  and  this  without  impair- 
ing the  efficiency  or  inconveniencing  the  public  in  any 
way."     {The  Press,  Christchurch,  April  3,  1909.) 

This  retrenchment  has  been  partly  carried  out,  re- 
sulting in  a  saving  of  £98,970  and  affecting  some  940 
civil  servants  at  a  time  when  it  was  a  very  serious  matter 
for  them  to  lose  their  billets.  But  a  serious  fall  in  the 
revenue  from  customs  duties  during  the  first  part  of  the 
year  made  some  degree  of  retrenchment  absolutely 
necessary.     Early  in  the  year   1910  Sir  Joseph  Ward 


THE  PUBLIC  DEBT  115 

announced  that  the  return  of  good  times  had  removed 
the  necessity  for  further  retrenchment.  {Otago  Daily 
Times,  May  6,  1910.) 

Meanwhile,  because  of  the  alarm  in  Great  Britain 
about  a  possible  German  invasion,  New  Zealand 
has  offered  to  provide  a  "  Dreadnought "  for  the 
British  navy,  at  a  cost  of  about 
£2,000,000  ($10,000,000),  which  will  Dreadnoughts 
necessitate  further  loans,  and,  probably, 
more  retrenchment.  (Budget,  1909,  p.  xii.)  This  will 
involve  an  expenditure  decidedly  unproductive  in 
its  character,  but  approved  by  the  people  of  New 
Zealand,  who  fear  the  colonial  ambitions  of  Germany, 
strongly  believe  in  the  "  yellow  peril,"  and  are  most 
loyal  to  the  British  Empire.  In  view  of  the  need  for 
more  "Dreadnoughts"  in  the  future  it  seems  desirable 
that  strict  economy  be  practised  and  that  the  credit 
of  the  Government  should  stand  as  high  as  possible. 

When  Parliament  met  toward  the  end  of  the  year, 
it  provided  for  additional  taxation  to  meet  an  anticipated 
decline    in    the   revenue   from    customs 
duties  and  from  the  incom.e-tax.     Alto-      Interests  of 
gether,  the  finances  cannot  be  said  to  be      the  Taxpayers 
in  a  perfectly  satisfactory  condition.     If 
there  is  to  be  less  borrowing  in  the  future  there  must  be 
more  taxation,  and  very  soon  it  will  be  necessary  to  im- 
pose direct  taxes  upon  the  small  proprietors  who  have 
ruled  the  Dominion  for  the  past  nineteen  years.    When 
this  takes  place  there  will  doubtless  be  a  marked  change 
of  opinion  in  the  direction  of  economy  in  expenditure  and 
financial  reform  in  general. 

Already  there  has  been  much  criticism  of  the  financial 
policy  of  the  Government,  and  many  valuable  suggestions 
have  been  made,  among  which  the  following  appear 
most  deserving  of  mention: 


ii6     STATE  SOCIALISM  IN  NEW  ZEALAND 

I.  As  far  as  possible,  the  Government  should  borrow 
only  for  works  that  are  directly  repro- 

Government's      j^^tive,    yielding   at   least   interest    on 
Credit  must  be      ,     .  .     , 

Maintained  ^heir  capital  cost. 

2.  The  railways  and  all  tlie  other 
investments  of  the  Government  should  earn  the  full 
amount  of  interest  on  their  capital  cost,  and  a  surplus 
besides,  to  cover  any  possible  depreciation  or  any 
deficiency  of  revenue  in  time  of  crisis. 

3.  Roads  and  bridges  should  be  paid  for  out  of  reve- 
nue, and  at  least  half  of  the  cost  should  be  paid  by  the 
locality  benefited,  preferably  by  a  betterment  tax  on 
land  values. 

4.  Maintenance  of  roads  and  public  buildings  should 
be  charged  to  revenue,  but  the  local  governing  bodies 
should  bear  the  greater  part  of  the  expense  of  keeping 
up  the  roads. 

5.  The  part  of  the  debt  not  represented  by  productive 
investments  should  be  paid  off  gradually,  whether  by 
means  of  sinking  funds  or  otherwise.  The  proceeds  from 
the  sale  of  public  lands  should  be  set  apart  for  this  pur- 
pose. 

6.  There  should  be  greater  uniformity  in  the  accounts 
of  the  various  departments,  greater  publicity  of  accounts, 
and  a  system  of  post-audit  instead  of  pre-audit  as 
formerly. 

To  effect  any  or  all  of  these  reforms  it  is  desirable  and 
necessary  that  criticism  of  public  affairs  should  be  en- 
couraged and  an  effective  public  opinion  created  that  will 
support  the  Government  in  maintaining  sound  principles 
of  public  finance.  Unless  the  people  can  be  enlightened, 
and  persuaded  to  prefer  the  general  welfare  to  sectional 
interests,  the  only  hope  of  reform  lies  in  the  unpleasant 
prospect  of  financial  stringency  which  will  compel 
economy  by  cutting  off  the  supply  of  funds. 


CHAPTER  VII 

THE   LAND  AND   INCOME   TAX 

The  New  Zealand  Government  is  different  from 
both  the  Federal  and  the  State  Governments  of  the 
United  States  in  that  the  power  to  levy 
taxes  of  all  kinds  in  practically  unre-  Autonomy  of 
stricted.  Theoretically,  the  British  Gov-  New  Zealand 
ernment,  in  the  exercise  of  its  supreme 
legislative  authority,  has  the  right  to  tax  all  parts  of  the 
Empire,  but  the  right  is  never  exercised.  The  principle 
established  by  the  American  Revolution,  that  there  shall 
be  no  taxation  without  representation,  still  bears  fruit 
in  the  practical  autonomy  that  New  Zealand  and  the 
other  self-governing  dependencies  enjoy. 

The  New  Zealand  Government  is  not  hampered  by 
any  constitutional  restrictions  as  to  the  purpose  for 
which  taxes  may  be  levied,  nor  is  there  any  prohibition 
of  class  legislation  nor  any  clause  in  the  Constitution  Act 
forbidding  the  taking  of  private  property  without  due 
process  of  law,  although  as  a  matter  of  fact  this  is  never 
done.  The  Government  has  a  free  hand.  It  may  and 
does  levy  duties  on  imports  from  Great  Britain  and  other 
parts  of  the  Empire;  it  imposes  taxes  not  only  for  reve- 
nue but  as  a  means  to  social  reform;  and  many  of  its 
laws,  as  the  graduated  land  tax,  would  doubtless  be 
regarded  as  class  legislation  by  American  courts. 

The  following  are  the  chief  heads  of 

,  ,.  r        .1  The  Consoli- 

revenue  and   expenditure   tor  the  year       d  t  d  F     d 

1 908-09 of  the  Consolidated  Fund,  which 

includes  the  revenue  and  expenditure  of  the  Post  and 

117 


ii8     STATE  SOCIALISM  IN  NEW  ZEALAND 

Telegraph  Department  and  the  Railways  Department, 
but  not  that  of  the  other  governmental  enterprises,  for 
which  there  are  separate  accounts.  (Year-Book,  1909, 
P-  575-) 

CONSOLIDATED  FUND  REVENUE   AND    EXPENDITURE 

Reirnue.  £  £ 

Balance  on  31st  March,  1908 767,849 

Customs  duties 2,801,248 

Beer  duty 116,214 

Stamps  (including  postal  and  telegraph  cash 

i-eceipts) 1,591,328 

Land-tax 604,901 

Income-tax 32 1 ,044 

Railways 2,918,507 

Registration  and  other  fees 117,061 

Marine  dues 43.815 

Miscellaneous 264,210 

Territorial  revenue 222,857 

9,001,185 

Other  receipts  — 
Recoveries  in  respect  of  expenditure  of  pre- 
vious years 800 

£9.769>834 

Expenditure.  £             £ 

His  Excellency  the  Governor 7,000 

Legislative 61 ,409 

Ministers'  salaries  and  allowances 16,882 

Interest  and  sinking  fund  charges 2,258,365 

Exchange  and  commission 20,091 

Pensions,  civil  and  military 40,616 

Old-age  pensions 345.630 

Railways 2,120,987 

Public  instruction 874,818 

Postal  and  telegraph  services 806,293 

Judicial  and  legal 366,456 

Piospitals  and  charitable  institutions I57.93I 

Defence  (including  Naval) 233,976 

Subsidies  to  local  bodies 115,704 

Department  of  Agriculture 168,422 

Mental  hospitals 90,482 

Valuation  Department 35-451 

Customs 52,309 

Marine  (including  harbours  and  lights) 67,692 

Printing  and  stationery 46,964 

Electoral 66,454 

Registration  of  land  and  deeds,  births,  deaths, 

and  marriages 32.696 


THE  LAND  AND   INCOME  TAX  119 

£              £ 
Public  buildings  and  domains,  and  mainte- 
nance of  roads 87,185 

Public  Health  Department 38,025 

Labour  Department 30,571 

Tourist  Department 50,771 

Contribution  Superannuation  Funds 27,000 

Miscellaneous   expenditure 21 1,003 

Territorial  expenditure 354,330 

8,785,513 

Other  expenditure  — 

Transferred  to  Public  Works  Fund 800,000 

Balance  on  31st  March,  1909 184,321 

£9.769.834 

Of  the  total  revenue,  as  shown  here,  less  than  one 
half  was  derived  from  taxation,  and  the  amounts  raised 
were  as  follows  :    (Year-Book,  1909,  p.  594.) 

Customs  and  Excise  Duties £2,917,462 

Land-tax 604,901 

Income-tax 321,044 

Death  Duties 260,238 

Other  Taxes 274,116 

Total £4,377,761 

If  to  this  amount  we  add  £1,466,598,  the  total  of  lo- 
cal taxation,  including  special  taxes  for  water  and  other 
utilities   supplied    by   some    municipali- 
ties,  we   have   the   sum   of   £5,844,359        Taxation  per 
paid  by  the  people  of  New  Zealand  in       Capita 
general  and  local  taxes  (Year-Book,  1909, 
p.  597).        This  gives  an  average  of  about  £5.8  ($28)  per 
head  of  the  total  population,  including  the  Maoris,  an 
average  considerably  higher  than  the  total  of  federal, 
State  and  local  taxation  in  the  United  States,  which  was 
about  £3.3  ($16)  in  the  year  1902  and  cannot  be  more 
than  £4.3  ($20)  at  the  present  time.    However,  the  per 
capita  taxation   in   the  richer  States  of  the  Union  is 
greater  than  this.     (Special  Report  of  the  Census  Office 
on  Wealth,  Debt,  and   Taxation.      Washington,  1907.) 


120     STATE  SOCIALISM  IN  NEW  ZEALAND 

The  revenue  from  taxation  in  New  Zealand  has  greatly 
increased  in  recent  years.  In  1897-98  the  general  and 
local  taxes  were  only  £4.4  ($21.38)  per  head  of  the  total 
population.  This  extraordinary  increase  in  per  capita 
taxation  has  not  been  due  to  any  increase  in  the  rate  of 
taxation,  but  to  the  great  prosperity  of  the  Dominion 
during  the  past  ten  or  twelve  years,  most  of  the  taxes 
being  elastic,  automatically  increasing  their  yield  in  good 
times. 

More  than  half  of  the  revenue  from  taxes  is  derived 
from  customs  duties.  This  is  due  to  the  enormous 
foreign   commerce  of  New  Zealand,  whose    prosperity 

depends  chiefly  on  the  export  of 
Customs  vast    quantities    of    wool    and     frozen 

mutton,  also  dairy  produce,  in  return 
for  which  the  Dominion  imports  largely  from  abroad, 
chiefly  from  Great  Britain  and  other  parts  of  the  Empire. 
In  the  year  1908  the  value  of  the  imports  from  foreign 
countries  was  only  £2,691,008  out  of  a  total  value  of 
£17,247,162.  Of  this  amount,  merchandise  valued  at 
£1,643,937  was  imported  from  the  United  States. 
The  value  of  the  total  imports  for  1908  was  equal  to 
about  £17.2  ($83)  per  head  of  the  total  population,  com- 
pared with  which  the  import  trade  of  the  United  States 
is  very  small,  being  only  £3.5  ($17)  per  head  in  the  year 
1906-07.  On  the  other  hand,  the  domestic  commerce  of 
the  United  States  is  relatively  far  more  important  than 
that  of  New  Zealand. 

An  interesting  feature  of  the  New  Zealand  customs 
duties  is  the  preferential  tariff  in  favour  of  British  goods, 

established  by  the  Seddon  Government 
The  Preferential  in  1903.  This  did  not  involve  a  reduc- 
Tariff  tion  of  the  duties  on  British  goods,  but 

an  increase  in  the  duties  on  goods  im- 
ported from  foreign  countries.    At  first  these  extra  duties 


THE  LAND  AND   INCOME  TAX  i2i 

were  imposed  on  37  classes  of  goods  of  foreign  manufac- 
ture, but  now  about  198  items  are  included.  In  spite 
of  the  preferential  tariff,  which  is  intended  to  encourage 
trade  with  Great  Britain,  and  the  British  Colonies,  as 
well  as  to  give  the  New  Zealand  manufacturer  additional 
protection,  the  imports  from  the  United  States  in  1908 
showed  a  substantial  increase  over  those  of  the  pre- 
vious year. 

The  New  Zealand  tariff  is  not  highly  protective,  and 
yet  it  is  something  more  than  a  revenue  tariff.  The 
duties  of  the  ordinary  tariff  range  from 
5  per  cent,  to  40  per  cent.;  those  of  the  Indirect  Taxes 
preferential  or  discriminatory  tariff  run  Predominate 
as  high  as  50  per  cent,  or  more,  as  in  the 
case  of  the  cheaper  grades  of  American-made  shoes.  The 
revenue  derived  from  customs  in  the  year  1908-09  was 
about  17  per  cent,  of  the  value  of  the  imports  and  about 
£2.9  ($14)  per  head  of  the  total  population.  In  the  year 
1906-07  the  customs  revenue  of  the  United  States  was 
about  23  per  cent,  of  the  value  of  the  imports  and  only 
about  £.8  ($4)  per  head.  In  the  United  States,  there- 
fore, a  larger  proportion  of  the  revenue,  in  fact,  almost 
the  whole  of  the  revenue  of  states,  counties,  and  other 
civil  divisions,  is  derived  from  direct  taxation.  Only  the 
large  volume  of  imports  makes  it  possible  for  the  New 
Zealand  Government  to  deri\e  so  large  a  proportion  of  its 
income  from  customs  duties.  As  the  country  developes 
it  will  doubtless  be  necessary  to  raise  an  increasing  pro- 
portion of  the  re\enue  by  means  of  direct  taxation. 

The  Land  and  Income  tax,  although  yielding  little 
more  than  a  fifth  of  the  total  revenue  from  taxes  of  the 
general  Government,  is  of  special  interest 
in  that  it  throws  the  burden  of  direct    The  Land  and 
taxation    almost    altogether    upon    the    Income  Tax 
large    landholders    and    other    wealthy 


122      STATE  SOCIALISM  IN  NEW  ZEALAND 

people.  Also,  it  Is  a  partial  application  of  the  theories  of 
George  and  Wallace,  although  the  suggestion  that  special 
taxes  should  be  levied  upon  land  did  not  originate  with 
them. 

As  far  back  as  the  year  1844,  Lord  John  Russell  sent 
a  circular  letter  to  the  colonial  governors  of  Australia 

and  New  Zealand  recommending  a 
History  of  Direct  tax  on  land  as  the  form  of  taxation  most 
Taxation  suitable  to  the  conditions  prevailing  in  a 

new  and  growing  community,  but  thirty- 
four  years  elapsed  before  such  a  tax  was  imposed.  In  1844 
Governor  Fitzroy,  who  was  an  ardent  advocate  of  free 
trade,  passed  an  ordinance  abolishing  customs  duties  and 
substituting  a  graduated  property  and  income  tax  of  one 
percent,  on  property  and  income  combined  up  to  £1,000, 
but  no  taxpayer  was  liable  for  more  than  £12.  The 
change  was  welcomed  by  the  traders  and  whalers,  but  the 
settlers  ignored  or  evaded  the  law,  which  soon  failed  as  a 
means  of  raising  revenue  and  was  replaced  by  a  new  cus- 
toms tarifT.  No  further  attempt  was  made  to  impose 
direct  taxation  until  1878. 

At  that  time  the  Colony  was  prosperous,  though  on 
the  eve  of  a  crisis,  and   Ballance  considered  that  the 

burden  of  taxation  should  be  readjusted, 
The  Land  Tax  in  order  to  make  the  landowners  pay  a 
of  1878  larger  share  of  the  interest  on  the  public 

debt,  incurred  chiefly  for  the  building 
of  roads  and  railways,  which  had  greatly  increased  the 
value  of  land.  By  the  Act  of  1878  a  levy  of  i-2d.  in  the 
pound  was  made  on  the  capital  value  of  real  estate,  less 
the  assessed  value  of  improvements.  Although  this  was 
by  no  means  a  heavy  tax  it  stirred  up  much  opposition 
among  the  more  well-to-do  landowners,  and,  after  the  fall 
of  the  Grey  Government  in  1879,  the  Act  was  repealed. 


THE  LAND  AND   INCOME  TAX 


123 


(Land-tax  Act,    1878.     Reeves,   "State   Experiments," 
Vol.  I,  p.  258.) 

Atkinson  now  brought  forward  a  bill  to  establish  a 
general  property  tax  on  the  American  model,  and  the  Act 
was  passed  on  December  19,  1879. 
(Property  Tax  Act,  1879.)  It  provided  The  General 
for  a  tax  of  one  penny  in  the  pound  Property  Tax 
(five-twelfths  of  i  per  cent.)  on  all 
assessed  real  and  personal  property,  with  an  exemption 
of  £500.  Atkinson  admitted  that  much  was  to  be  said 
in  favour  of  taxing  unused  lands  held  for  speculative 
purposes,  but  considered  the  policy  impracticable.  An 
income  tax,  also,  he  rejected  as  "  too  inquisitorial  and 
unavoidably  open  to  great  inequalities,"  nor  did  he 
think  it  advisable  to  attempt  to  break  up  the  large  estates 
by  means  of  a  progressive  land  tax.  The  property  tax 
remained  in  force  until  1891,  when  it  was  repealed. 
The  following  table  shows  how  the  tax  was  paid  in  the 
year  1881 : 


AMOUNT  OF  TAX 


NO.  TAXPAYERS 


Under  £1 

£  I  and  under  £   5 

5  and  under  10 

10  and  under  20 

20  and  under  50 

50  and  under  100, 

100  and  under  200, 

200  and  under  300, 

300  and  under  400, 

400  and  under  500, 

500  and  under  1000, 

1000  and  under  2000, 

2000  and  under  3000, 

3000  and  under  4000, 

4000  and  under  5000. 

5000  and  under  6000 

6000  and  under  7000. 


5417 

9048 

3267 

2146 

1390 

480 

194 

66 

27 

14 

23 

12 

I 

o 

I 

o 

I 

22087 


124     STATE  SOCIALISM  IN  NEW  ZEALAND 

The  property  tax,  though  by  no  means  onerous,  soon 
became  unpopular,  chiefly  among  the  small  farmers  and 
tradesmen.  The  usual  objections,  some 
^^H  *°"^-  valid,  but  many  trivial  or  baseless,  were 

the  Property  Tax '^"'S^'^  against  it.  The  farmers  disliked 
paying  taxes,  however  small,  upon  build- 
ings, implements,  and  live  stock.  They  suspected  their 
rich  neighbours  of  successful  evasion,  especially  those  who 
owned  stocks  and  other  personal  property  which  could 
be  easily  concealed.  The  tradesmen  thought  that  they 
paid  too  much  as  compared  with  professional  and  salaried 
people,  although  they  shifted  a  large  part  of  the  tax  to  the 
shoulders  of  their  customers.  It  was  said  that  income 
from  property  paid  too  much  as  compared  with  in- 
come from  professional  services  and  salaries.  It  is 
interesting  to  note  that  the  very  opposite  of  this  argu- 
ment is  urged  against  the  present  income  tax. 

Again,  it  was  held  that  the  law  took  no  account  of 
the  earning  power  of  a  man's  capital,  and  that  people 
doing  a  large  business  on  a  small  capital  paid  less  than 
their  fair  share,  quite  ignoring  the  principle  of  diffusion 
of  taxes  and  the  tendency  towards  the  equalization  of 
profits.  Mr.  Reeves  said  in  Parliament  that  the  tax 
was  equal  to  an  income  tax  of  45.  in  the  pound  on  a  man 
who  was  making  6  per  cent,  on  his  capital,  and  only  6d. 
in  the  pound  on  a  man  making  17  per  cent.  (Parlia- 
mentary Debates,  Vol.  71,  p.  190.)  Mr.  Reeves  also 
says: 

"  Manufacturers,  shopkeepers,  and  trading  companies  also  found 
the  tax  unjust.  It  hit  them  as  hard  in  bad  years  as  in  good."  (State 
Experiments,  Vol.  i,  p.  259.) 

This,  of  course,  is  an  objection  that  can  be  urged 
against  almost  any  form  of  direct  taxation,  since  a 
Government  requires  practically  as  much  revenue  in  bad 


THE  LAND  AND   INCOME  TAX  125 

years  as  in  good,  and  a  system  of  taxation  which  yields 

a  fluctuating  revenue  is  far  from  satisfactory. 

Mr.  Reeves  further  says: 

"  To  these  solid  grounds  for  discontent  was  added  the  sentiment 
nourished  by  the  writings  of  George  and  Wallace. 
Avowed  single-taxers  were,  indeed,  very  few  in  Doctrines  of 

number,  as  they  still  are;    but  the  doctrines  of  single-taxers 

land-nationalizers  and  single-taxers  were  accept- 
able to  the  extent  of  distinguishing  between  real  estate  and  personal 
property  as  subjects  for  taxation.  A  line  was  also  drawn  between 
ground  values  and  improvements.  Large  tracts  of  most  of  the 
great  freeholds  were  unimproved.  Feeling  ran  high  against  land 
monopoly  in  1890,  and  higher  still  against  absentee  ownership.  The 
land  and  income  tax  bill  of  Ballance  was  greeted  as  a  measure  of 
revolution.  It  did  indeed  herald  a  species  of  political  revolution, 
which  is  still  in  peaceful  progress."  ("State  Experiments,"  Vol.  I, 
p.  260.) 

Another  reason  for  abohshing  the  property  tax  was 
that  the  Government  required  more  revenue,  and  it  was 
thought  that  this  could  be  secured  more  easily  by  taxing 
the  wealthy  classes  than  by  increasing  the  rate  of  taxa- 
tion on  property  in  general,  which  would  have  aroused  a 
storm  of  opposition.  But,  whether  for  one  reason  or 
another,  the  property  tax  was  condemned  by  the  small 
farmers  and  tradesmen;  and  when,  in  1891,  these  classes 
got  the  upper  hand,  with  Ballance,  the  author  of  the  land 
tax  of  1878,  as  premier,  they  repealed  the  Act  of  1879  and 
passed  the  Land  and  Income  Assessment  Act  in  its  stead. 

Behind  all  the  arguments  against  the  property  tax 
was  the  determination  of  the  small  proprietors  to  pay 
little  or  nothing  in  the  way  of  direct  Agitation 
ta.xes,  but  to  make  the  wealthier  people  against  the 
pay  all.  They  also  wished  to  break  up  Large  Land- 
the  large  estates,  and  in  this  they  were  holders 
strongly  supported  by  the  labouring  class,  who  desired 
that  they  or  their  sons  might  occupy  relatively  improved 
and  well-situated  land  instead  of  having  to  endure  the 
hardships  of  pioneer  life  in  the  back  blocks.  Again,  the 


126     STATE  SOCIALISM  IN  NEW  ZEALAND 

small  proprietors,  who  were  mostly  borrowers,  wished  to 
get  at  the  money  lenders  by  means  of  a  tax  on  mortgages, 
which  it  was  thought  could  not  be  shifted.  Also,  they 
used  the  arguments  of  single-taxers  in  so  far  as  it  suited 
their  purpose  to  do  so,  although  the  small  farmers,  who 
formed  the  backbone  of  the  new  democracy,  were  any- 
thing but  single-taxers.  A  special  tax  was  levied  upon 
absentee  landholders,  who  were  thought  to  be  a  par- 
ticularly undesirable  class  of  citizens;  and  the  income 
tax  was  added  in  order  to  catch  the  wealthy  merchants, 
manufacturers,  and  professional  people  of  the  towns. 
(Land  and  Income  Assessment  Act,  1891.) 

The  original  Act  has  been  amended  from  time  to 
time.  The  Consolidation  Act  of  1908  is  now  in  force. 
The  most  notable  features  of  the  Act  are  the  ordinary 
land  tax,  including  the  tax  on  mortgages  on  land,  the 
graduated  land  tax,  the  tax  on  absentee  owners,  and  the 
total  exemption  of  small  properties  and  incomes. 

The  ordinary  land  tax  is  assessed  on  the  unimproved 
value,  that  is,  the  value  of  the  land  alone  apart  from 
all  improvements,  or  what  the  land 
The  Ordinary  would  sell  for  without  improvements. 
Land  Tax  This    is     not    to    be    confounded    with 

"  prairie  value,"  that  is,  the  original 
value  of  unsettled  land.  Unimproved  value  may  be 
regarded  as  composed  of  two  elements — prairie  value 
plus  community  value.  The  Act  of  1891  allowed  deduc- 
tions for  improvements  up  to  £3,000,  but,  by  the 
amendment  of  1897,  the  value  of  all  improvements  was 
exempted.  The  rate  is  fixed  by  the  annual  taxing  Act. 
At  present  it  is  id.  in  the  pound  (4-10  of  i  per  cent.)  on 
the  unimproved  value.  Owners  of  land  of  which  the 
unimproved  value  is  £500  or  less  pay  no  tax. 

The  tax  on  mortgages  on  land  was  formerly  the  same 


THE  LAND  AND   INCOME  TAX  127 

as  the  tax  on  land,  but  in  1902  the  rate  lowered  to  3-4  d. 

in   the  pound   and   has  not  since  been 

changed.    The  tax  is  paid  by  the  mort-         Tax  on 

gagee,  that  is,  the  mortgagee  and  the         Mortgages 

mortgagor  are  treated  as  joint  owners  of 

the  land.    In  making  up  the  total  assessed  valuation  on 

which  an  owner  pays  taxes,  the  amount  of  mortgages 

owing  by  him  is  deducted  from  the  unimproved  value, 

while  the  amount  of  mortgages  owing  to  him  is  added 

thereto.     If  such  net  value  is  not  over  £500  the  owner 

pays  no  taxes ;  if  it  is  £  i  ,500  he  pays  on  £  i  ,000  and  there 

are  diminishing  exemptions  up  to  £2,500,  at  which  point 

the  exemption  ceases  and  the  owner  pays  on  the  full 

unimproved   value. 

When  the  tax  on  mortgages  was  first  imposed  it  was 

said  that  it  would  fall  on  the  borrowers,  since  the  lenders 

would   charge    a  rate    of  interest    high 

enough  to  recoup  themselves.  Mr.  Reeves  ,    ^ 

*  f  the  Tax  on 

states  that  such  has  not  been  the  case         Mortgages 

(State  Experiments,  Vol.  I,  p.  261),  but 
the  tax  was  small  and  its  effects  were  obscured  by  changes 
in  the  rate  of  interest  due  to  other  causes.  From  1891 
to  about  1898  the  rate  of  interest  on  mortgages  declined, 
but  afterwards  rose.  In  the  year  1898-99,  about  58  per 
cent,  of  the  money  lent  on  mortgages  was  lent  at  5  per 
cent,  or  less,  but  in  the  year  1907-08  only  55  per  cent,  was 
lent  at  such  rates.  It  seems  probable  that,  if  the  tax 
had  not  been  imposed,  the  rate  of  interest  would  have 
fallen  more  during  the  former  period  and  would  have 
risen  less  in  the  past  few  years. 

At  a  conference  of  the  New  Zealand  Chambers  of 
Commerce  during  the  recent  financial  stringency,  a  reso- 
lution was  passed  condemning  the  mortgage  tax,  and 
some  weeks  later  the  New  Zealand  Farmers'  Union  re- 
solved : 


128      STATE  SOCIALISM  IN  NEW  ZEALAND 

"  That  this  conference  endorses  the  resolution  passed  by  the 
conference  of  the  united  Chambers  of  Commerce,  to  the  effect  that 
the  mortgage  tax  be  abohshed,  and  that  taxation  on  mortgages  be  in 
the  form  of  an  income  tax."  {Evening  Post,  April  13,  1909;  Ihid. 
July  29,  1909.) 

The  graduated  land  tax,  which  was  designed  chiefly 
to  compel  the  large  holders  to  sell  or  otherwise  subdivide 

their  estates,  was  altered  in  1907  in  the 
The  Graduated  direction  of  increasing  the  tax  on  the 
Land  Tax  larger  holdings,     (An  Act  to  Amend  the 

Land  and  Income  Assessment  Act,  1900. 
October  26,  1907.)  It  begins  with  a  tax  of  1-16  of  a 
penny  in  the  pound  when  the  unimproved  value  in  any 
assessment  is  not  less  than  £5,000  and  is  less  than  £7,000, 
and  increases  by  sixteenths  to  13-16  of  a  penny  when  the 
unimproved  value  13  between  £35,000  and  £40,000. 
When  the  unimproved  value  is  £40,000  the  rate  is  sudden- 
ly increased  to  85.  in  every  £100  (0.4  of  i  per  cent.),  and 
for  every  additional  £1,000  of  unimproved  value  the 
rate  is  increased  by  1-5  of  a  shilling  in  every  £100. 
The  rate  reaches  its  maximum  at  £200,000,  when  it  is 
2  per  cent,  on  the  total  unimproved  value.  For  and 
after  the  year  ending  March  31,  1910,  the  progressive 
taxes  on  estates  over  £40,000  are  to  be  increased  by  25  per 
cent,  in  the  case  of  land  other  than  business  premises. 

The  total  ordinary  and  graduated  taxes  paid  by  the 
owners  of  large  estates  are  now  very  heavy.     An  estate 

of  which  the  unimproved  value  is 
Heavy  Taxation  £200,000  pays  a  graduated  tax  of  2)^  per 
of  Large  Estates  cent,  in  addition  to  the  ordinary  land  tax 

of  id.  in  the  pound  (0.41  of  i  per  cent.), 
making  2.91  per  cent,  in  all.  But  the  graduated  tax  is 
increased  by  50  per  cent,  in  the  case  of  absentee  owners, 
so  that  the  absentee  owner  of  an  estate  of  which  the 
unimproved  value  was  £200,000,  if  such  an  estate  existed, 


THE  LAND  AND   INCOME  TAX  129 

would  pay  a  tax  of  4.16  per  cent.    By  the  Amended  Act 

of  1907  a  person  is  deemed  to  be  an  absentee  "  unless  he 

has  been  personally  present  in  New  Zealand  for  at  least 

one-half  of  the  period  of  four  years  immediately  preceding 

the  year  in  and  for  which  he  is  assessed  for  graduated 

land-tax."     (An  Act  to  Amend  the  Land  and  Income 

Assessment  Act,  1900.     October  28,  1907;    Year-Book, 

1908,  pp.  563,  669.) 

The  purpose  of  the  graduated  tax  is  to  bring  about  a 

subdivision  of  the  great  estates  and  it  has  had  some 

effect    in    this    direction,    as    has    been 

shown  in  the  Chapter  on  Land  Monop-  ^l^^  of  Revenue 

,         _,  1  r    1  when  Estates 

oly.    But  some,  at  least,  or  these  estates,  ^^.^  Divided 

instead  of  being  broken  up  and  sold  to 
small  holders,  have  merely  been  divided  among  the 
members  of  families,  before  or  after  the  death  of  the 
owners,  while  the  Government  has  lost  a  good  deal  in 
the  way  of  graduated  tax.  This  loss  has  amounted  to 
£28,186  in  the  twelve  years  from  1896  to  1907.  The 
Government  has  lost  more  than  this  by  having  pur- 
chased and  subdivided  certain  large  holdings,  under  the 
land  for  Settlements  Act.  The  graduated  taxes  that 
would  have  been  paid  had  the  estates  remained  intact 
has  been  estimated  at  £82,909  for  the  eleven  years  from 
1895  to  1905,  besides  the  loss  on  the  Cheviot  Estate, 
which  was  purchased  under  another  Act.  (Return 
B.  24c,  Session  of  1907;  Return  B.  24A,  Session  of 
1905.)  But  the  graduated  tax  is  designed  to  break  up 
the  large  estates,  and  when  this  work  is  accomplished  the 
revenue  now  derived  from  this  source  will  have  to  be 
raised  in  some  other  way. 

The  taxation  of  unimproved  values  naturally  brought 
about  a  radical  change  in  the  methods  of  valuing  proper- 
ty, but  before  the  year  1896  there  was  no  uniformity 


130     STATE  SOCIALISM  IN  NEW  ZEALAND 

in   this  matter.      The  Land  and   Income  Tax  Depart- 

.    .  ment     periodically    employed    a    small 

Valuation  of  V  ,  , 

j^gjjj  army  oi  temporary  valuers,  and  every 

local  authority  had  its  own  method 
of  making  up  its  roll  for  the  levying  of  rates. 
But  in  1896  the  Government  Valuation  of  Land  Act 
was  passed  (since  amended  several  times),  for  the  pur- 
pose of  securing  uniformity  in  valuation,  particularly 
in  the  administration  of  the  land  tax  and  the  rating  on 
unimproved  values.     (Year-Book,  1909,  p.  550.) 

The  Act  provides  for  the  appointment  of  a  valuer- 
general  and  district  valuers  to  hold  office  during  pleasure. 
The  district  valuers  reside  in  their  districts,  soon  become 
expert  in  their  work,  and  generally  command  the  confi- 
dence of  the  people.  There  is  little  or  no  corruption  or 
bribery.  The  valuation  is  not  made  at  stated  times,  but 
is  constantly  being  revised,  although  it  is  sometimes  out 
of  date.  The  officials  say  that  there  are  no  insuperable 
difficulties  in  the  way  of  distinguishing  unimproved  values 
from  the  value  of  improvements.  The  Amendment  of 
1900  gives  elaborate  definitions  of  unimproved  value, 
value  of  improvements  and  other  terms,  for  the  guidance 
of  the  valuers.  (The  Government  Valuation  of  Land 
Act,  1896,  and  Amendments  of  1900  and  1903.) 

The  farmers  as  a  class  are  not  satisfied  with  the  sys- 
tem of  valuation  and  think  that  it  is  frequently  inequit- 
able. The  following  resolution  was  passed  unanimously 
at  a  meeting  of  the  New  Zealand  Farmers'  Union  at 
Wellington  on  July  28,  1908: 

"  (i)  That  the  present  system  of  revaluation  of  rural  land  for  lanp 
tax  purposes  upon  the  unimproved  values  is  inequitable,  and  is  no 
reliable  basis  to  enable  anyone  to  make  a  valuation  other  than  a 
purely  arbitrary  one;  (2)  that  a  capital  value  is  the  only  ascertain- 
able value  which  can  be  equitably  arrived  at;  and  (t;)  that  the  tax- 
able and  rateable  value  on  which  the  average  capital  value  of  land 
is  taken  be  over  a  scries  of  years,  and  not  the  saleable  value  of  the 
day."    (The  Evening  Post,  Wellington,  July  29,  1908.) 


THE  LAND  AND   INCOME  TAX  131 

The  valuation  of  all  the  land  improvements  was  com- 
pleted in  1898.  The  unimproved  value  was  given  as 
£84,401 ,244,  and  the  value  of  improvements  £54,196,103. 
In  the  year  1909  the  unimproved  value  was  £172,759,948, 
and  the  value  of  improvements  £98,756,022,  making 
together  a  capital  value  of  £271,516,022.     (Year-Book, 

1909.  p.  558.) 

Of  late  years  there  has  been  a  good  deal  of  speculation 
in  new  lands;  speculative  values  have  in  many  cases  run 
ahead  of  permanent  investment  values; 
and  the  Valuation  Department  has  been  Speculative 
accused  of  encouraging  speculation  by  Values 
overvaluing  the  land.  There  are  several 
reasons  why  the  valuation  tends  to  be  high.  In  the  first 
place,  the  Department  wishes  to  make  a  high  valuation 
in  order  to  secure  a  large  revenue  from  the  land  tax. 
Secondly,  the  Government  likes  to  show  a  high  valuation 
because  it  is  an  indication  of  prosperity  and  strengthens 
the  Government's  credit  in  the  loan  market.  Thirdly, 
the  owners  like  to  have  a  high  valuation  when  they  come 
to  sell  their  land  or  to  borrow.  Fourthly,  if  the  owner 
insists  on  a  low  valuation,  the  Government  may  purchase 
the  land  at  the  owner's  valuation.  True,  the  owner  has, 
under  the  Act,  the  right  to  demand  that  the  Government 
purchase  his  land  at  the  Government's  valuation,  or  to 
have  the  valuation  reduced,  but  there  may  be  reasons  why 
an  owner  might  not  want  to  do  this.  At  any  rate,  there 
has  been  little  protest  against  the  Government's  valua- 
tion until  recently,  when  speculative  values  have  fallen 
off  and  the  land  tax  has  become  a  burden.  And  yet,  a 
record  of  a  number  of  sales  made  in  1908  showed  that  the 
properties,  which  sold  for  £1 ,723,937,  were  valued  at  only 
£1,332,993,  or  about  23  per  cent,  less  than  the  selling 
value  {Evening  Post,  Speech  by  Dr.  Findlay,  July  31, 


132     STATE  SOCIALISM  IN  NEW  ZEALAND 

1909;  Budget,  1909).  But  values  seem  to  be  high  from 
the  investor's  point  of  view,  and  it  is  a  question  whether 
a  farmer  can  earn  interest  on  either  the  sclHng  value  or 
the  governmental  valuation. 

The  income  tax  is  complementary  to  the  land  tax, 
being  levied  upon  incomes  derived  from  sources  other 
than  land  and  mortgages  on  land.      It  is  a  graduated 

tax,  with  an  exemption  of  £300  ($1 ,460), 
The  Income  Tax  which,    however,     is     not     allowed     to 

absentees.  Life  insurance  premiums  on 
the  taxpayer's  own  life  are  exempted  up  to  £50.  Before 
the  year  1910  the  rate  was  6d.  in  the  pound  (2.5  per  cent.) 
on  the  first  £1,000  of  taxable  income,  after  allow- 
ing the  exemptions.  On  incomes  in  excess  of  £1,300 
the  rate  was  is.  in  the  pound  (5  per  cent.).  In 
the  session  of  1909  an  amendment  was  passed 
providing  for  a  new  scale  with  more  grades,  and  it 
was  anticipated  that  an  additional  revenue  of  about 
£80,000  would  be  secured  in  this  way.  Companies  enjoy 
no  exemptions,  but  friendly  societies,  building  societies, 
savings  banks,  co-operative  dairy  companies,  and 
charitable  and  educational  institutions  are  wholly  ex- 
empted from  the  income  tax.  No  distinction  is  made 
between  incomes  derived  from  property  and  those 
derived  from  earnings. 

The  Department  is  very  strict  in  the  administration 
of  the  tax,  using  an  elaborate  system  of  inspection  and 
investigation    and     inflicting     penalties     for     incorrect 

or  fraudulent  returns,  so  that  there 
Little  Evasion      is  very  little   concealment    of    incomes 

derived  from  investments  in  New 
Zealand.  The  tax  on  incomes  from  investments  abroad 
could  be  more  easily  evaded .  The  yield  of  the  income  tax 
for  the  year  1908-09  was  £321,044  ($1,560,000),  while 
the  land  tax  yielded  £604,901   ($2,940,000). 


THE  LAND  AND   INCOME  TAX  133 

Farmers  complain  that  they  are  taxed  more  heavily 
than  merchants  and  professional  men;  but,  in  view  of 
the   large    profits   they   have   made   in 
recent  years  and  the  great  increase  in  the  The  Farmers 
value  of  their  land,  they  do  not  seem  to  complain 
have   any   serious   grievance.      Besides, 
profits  in  all  kinds  of  business  tend  to  equality,  and  no 
class  of   people  except  landowners  can  derive  a   per- 
manent benefit  from  exemption  from  taxation.     Also, 
the  small   farmers,   as  well   as  the  small   shopkeepers 
and  all  other  people  of  small  means,  are  wholly  exempted 
from  the  land  and  income  tax,  which  is  paid  altogether  by 
the  more  well-to-do  people.     The  land  tax,  therefore,  is 
quite  different  from  the  single  tax  proposed  by  Henry 
George,  who  would  have  society  appropriate  the  whole 
economic  rent  of  land,  whether  owned  by  large  or  small 
proprietors. 

The  success  of  the  small  proprietors  in  getting  rid  of 
the  burden  of  taxes  by  substituting  the  land  and  income 
tax  for  the  hated  property  tax  was  truly 
remarkable.     In  the  year  1889  the  num-  Small  Farmers 
ber  of  taxpayers  paying  property  tax  was  pay  no  Land  Tax 
26,327,  or  4.3  per  cent,  of  the  European 
population.  In  the  year  1892-93  there  were  12,360  persons 
paying  land  taxes  and  3,448  paying  income  taxes,  making 
in  all  15,808  taxpayers,  or  2.5  per  cent,  of  the  population. 
In  fact,  the  number  of  taxpayers  was  somewhat  less  than 
this,  since  some  persons  paid  both  land  and  income  taxes. 
(Report  by  the  Commissioner  of  Taxes,  C.  B.  Crombie, 
July  28,  1893 ;  Year-Book,  1893,  p.  425.) 

The  number  of  persons  paying  land  and  income  taxes 
has  increased  both  absolutely  and  relatively  since  1893, 
because  of  more  careful  administration  and  because 
of  the  Increase  in    wealth    of    a   considerable  class  of 


134     STATE  SOCIALISM  IN  NEW  ZEALAND 

people,  formerly  struggling  farmers  and  shopkeepers.    In 

the  year  1908-09  there  were  30,855  per- 
Direct  Taxes  sons  paying  land  taxes,  out  of  128,019 
paid  by  the  Rich  freeholders  and  25,204  Crown   tenants. 

The  Crown  tenants  pay  no  kind  tax.  In 
the  same  year  there  were  10,839  persons  paying  income 
tax,  making  in  all  4 1 ,694  taxpayers,  or  4.3  per  cent,  of  the 
population,  not  allowing  for  those  who  pay  both  land 
and  income  taxes.  (Parliamentary  Return  B.-17A,  1907 ; 
Year-Book,  1909,  pp.  443,  597.)  But  most  of  the  tax- 
payers pay  only  small  amounts,  and  it  is  safe  to  say  that 
by  far  the  greater  part  of  the  direct  taxes  are  paid  by 
some  12,000  or  15,000  people.  (Parliamentary  Returns 
B. -20,  and  B-20A,  1904.)  To  this  fact  may  be  traced  much 
of  the  laxity  in  public  expenditure  characteristic  of  the 
democracy  of  New  Zealand.  Back  of  this  inequality  in 
the  payment  of  taxes  lies,  of  course,  a  corresponding 
inequality  in  the  distribution  of  wealth. 

In  connection  with  the  land  and  income  tax  should 
also  be  mentioned  the  stamp  duties,  an  important  source 
of    revenue,    yielding    £534,354    ($2,600,000)    in    the 

year  1908-09.  These  taxes  are  paid 
Stamp  Duties       upon    a    great    variety   of   instruments, 

including  affidavits,  agreements,  annual 
licenses  of  companies,  assignments,  bills  of  lading, 
sea  insurance  policies,  certificates  of  incorporation, 
conveyances,  deeds,  receipts,  transfer  of  shares,  let- 
ters of  administration.  But  the  most  important 
are  the  death  duties,  which  yielded  £260,238  in  the 
year  1908-09  (Year-Book,  1909,  pp.  594-597) .  Under  the 
law  as  it  stood  before  1909,  there  was  an  exemption  of 
£100,  and  the  duties  varied  from  2Y2  P^r  cent,  on  any 
amount  exceeding  £100  but  not  exceeding  £1,000  up  to 
13  per  cent,  on  estates  valued  at  £20,000  or  more  left  to 


THE  LAND  AND   INCOME  TAX  135 

strangers  in  blood.  In  the  session  of  1909  an  amendment 
Act  was  passed  allowing  an  exemption  of  £500,  but  pro- 
viding for  increased  duties  on  the  larger  estates.  A  dis- 
tinction is  drawn  in  the  new  Act  between  estate  duties 
on  the  total  value  of  an  estate  and  succession  duties  on  the 
shares  of  the  beneficiaries.  The  estate  duties  vary  from  i 
per  cent,  to  15  per  cent.,  according  to  the  value  of  the 
estates,  and  the  succession  duties  are  additional.  It  was 
estimated  that  the  new  scale  would  produce  additional 
revenue  amounting  to  about  $150,000,  (Parliamentary 
Debates,  Vol.  148,  pp.  441-454,  Nov.  29,  1909;  TheEven- 
ing  Post,  Nov.  26  and  Dec.  i,  1909.) 

In  discussing  the  proposed  duties  Mr.  Baume  said 
in  the  House: 

"  I  do  take  very  strong  exception  to  the     ^an  Capital  be 
stoppage  of  the  graduation  at  15  per  cent.     .     .     driven  away  by 
In  my  opinion  the  graduation  should  go  higher.     Taxation? 
In  my  opinion,  at  any  rate,  there  could  be  no 
objection  to  it  going  as  high  as  25,  30,  or  even  40  per  cent." 

In  a  similar  vein  Mr.  Laurenson  said : 

"  This  Bill  proposes  to  get  at  the  wealthy  classes.    The  honour- 
able gentleman  (Mr.  Herdman)  says  that  it  is  an  increase  of  taxation. 
As  I  have  already  pointed  out,  it  does  not  amount  to  an  increase  of 
taxation  so  much  as  it  is  a  legitimate  attempt  to  aid  in  the  distribu- 
tion of  wealth." 

In  opposition  to  this  view  Mr.  Herdman  said: 

"  We  want  industries  here;  we  want  to  simulate  enterprise;  but 
if  you  attempt  a  system  of  taxation  which  makes  people  afraid,  which 
frightens  the  capitalist,  and  rather  tempts  him  to  send  his  money 
away,  then,  I  think,  recollecting  that  this  country  is  at  the  commence- 
ment of  its  career,  we  are  adopting  a  policy  which  is  unwise." 

In  reply  to  this  Sir  Joseph  Ward  said : 

"  If  a  man  goes  away  out  of  the  country,  and  takes  his  fortune 
with  him,  he  cannot  take  the  land  or  the  sheep  that  represent  that 
fortune.  He  must  sell  to  somebody  else,  and  everybody  is  not  going 
to  leave  New  Zealand  and  so  escape  the  death  duties."  (Parliamen- 
tary Debates,  Vol.  148,  pp.  448,  453.) 

The  people  of  New  Zealand  are  very  much  taxed,  not- 


136     STATE  SOCIALISM  IN  NEW  ZEALAND 

withstanding  the  fact  that  the  Government  carries  on  a 

number  of  enterprises  which  one  would 
State  Trading       ^^^-^^^^   ^j^^^j^      j^jj    ^      ^^^^   ^^^^    ^^^^^ 

has  not  relieved        ,.   r   r  ■  V.  i 

the  Tax  Payers  ""chet  from  taxation.  But  these  enter- 
prises are  not  managed  so  as  to  yield 
a  true  profit,  and  in  some  cases  they  result  in  a  deficit. 
The  railway  deficit  for  1908-09  was  about  £212,000 
($1,030,000),  about  twice  the  revenue  derived  from  the 
beer  duty.  The  interest  on  the  net  public  debt,  that  is, 
the  gross  debt  less  the  value  of  the  productive  invest- 
ments, was  about  £1,000,000  ($4,860,000),  more  than 
enough  to  absorb  the  entire  revenue  from  the  land  and 
income  tax.  Then  there  is  the  sum  of  £345,630,  given 
to  the  aged  poor  in  the  form  of  pensions,  which  is  about 
two  thirds  of  the  revenue  from  the  stamp  duties.  Also, 
there  has  been  for  some  years  a  large  surplus  of  revenue 
over  expenditure,  most  of  which  has  been  transferred  to 
the  Public  Works  Fund,  chiefly  for  public  buildings, 
roads  and  bridges.  There  has  also  been  some  extrava- 
gance in  expenditure,  due  chiefly  to  the  prosperity  that 
has  prevailed  during  the  past  twelve  years,  but  partly, 
no  doubt,  to  the  fact  that  the  people  who  vote  for  the 
expenditure  are  not  those  who  pay  the  taxes. 

It  is  possible  and  even  probable  that  there  will  be 
reform  in  public  expenditure  in  the  near  future.  The 
Government  has  lately  announced  its  intention  to  try  to 
make  the  railways  earn  at  least  the  interest  on  their  cap- 
ital cost.  It  is  possible  that  the  unproductive  part  of 
the  public  debt  may  be  paid  off,  or  that  the  governmen- 
tal enterprises  may  become  more  productive,  so  that  the 
enormous  burden  of  interest  may  be  taken  away.  Then, 
too,  the  Government  has  proposed  and  begun  a  system 
of  economics  in  the  civil  service  from  which  much  is 
expected. 


THE  LAND  AND   INCOME  TAX  137 

But  it  is  not  at  all  likely  that  any  of  these  reforms 
will  bring  relief  to  the  taxpayers.  There  may  be  a  larger 
surplus  togpend  on  roads  and  bridges,  or 
some  of  the  public  debt  may  be  paid  off,     Taxes  likely 
or  the  amount  expended  on  old  age  pen-     to  Increase 
sions  may  be  increased ;   but  taxes  will 
increase,  for  the  political  power  has  passed  away  from 
the  wealthy  class,  who  pay  most  of  the  taxes,  into  the 
hands  of  a  democracy  of  relatively  poor  people  who  are 
now  taking  their  turn  at  exploiting  the  rich,  and  regard 
the  capitalist  as  a  cow  to  be  milked  or  a  goose  to  be  kept 
for  the  sake  of  its  golden  eggs. 


CHAPTER  VIII 
LOCAL  TAXATION  OF  LAND 

The  revenue  of  the  cities,  boroughs,  counties,  road 
boards,  and  other  local  governing  bodies  is  derived  only 
in    part    from    taxation.      In    the    year 
Revenues  of  1907-08  their  total  revenue  was  £3,106,- 

Local  Governing  r      ,  •  ,      o         .  1  , 

Bodies  992,   of  which  £1,356,257,  or  less  than 

half,  was  derived  from  rates.  Of  this 
amount  £949,138  consisted  of  general  rates,  and  the 
balance  of  special  rates,  for  water  and  other  special 
purposes.  The  total  amount  of  local  taxation,  including 
rates,  licenses,  and  other  taxes,  was  £1,466,598,  or  about 
£1.52  ($7.32)  per  head  of  the  European  population. 
The  local  taxes,  then,  are  only  about  one  fourth  of  the 
total  taxes,  three  fourths  being  raised  by  the  general 
Government.  The  relative  unimportance  of  the  local 
bodies  is  largely  due  to  the  fact  that  the  system  of  public 
instruction  is  wholly  supported  by  the  general  Govern- 
ment, which  in  addition  grants  large  subsidies  to  the 
local  bodies.  (Year-Book,  1909,  pp.  195-201.)  The  rev- 
enue derived  from  the  general  rates  alone  is  equal  to 
£.98  ($4.80)  per  head  of  the  population. 

Before  the  year  1896  rates  might  be  levied  upon  the 
capital  value  or  the  annual  value  of  real  estate,  at  the 

option  of  the  local  authorities.  The  an- 
Taxation  of  nual  value  is  an  estimate  of  the  rental 

Real  Estate  value  of  property,  which  cannot  in  any 

case  be  less  than  five  per  cent,  of  the  fee 
simple.  Capital  value  is  the  value  of  the  fee  simple,  if 
held  free  from  encumbrances.     (An  Act  to  Consolidate 

138 


LOCAL  TAXATION  OF  LAND  139 

the  Law  for  Regulating  the  making  and  levying  of  rates, 
1894.)  The  system  of  rating  on  the  annual  value  is 
preferred  by  most  of  the  boroughs,  while  the  counties 
usually  levy  on  the  capital  value. 

The  passage  of  the  Land  and  Income  Assessment  Act 
of  1 89 1  called  the  attention  of  the  local  bodies  to  the  pos- 
sibility of  a  third   form  of  rating,   the 
rating  on  unimproved  values,  which  had  Rating  on  Un- 
already  been  strongly  urged  by  the  fol-  improved  Values 
lowers  of  Henry  George.     Besides,  there 
were  the  usual  objections  to  the  existing  methods  of 
rating,  and  there  Vv'as  a  certain  amount  of  speculation  in 
land,  which  in  some  places  was  withheld  from  sale  and 
kept  unimproved  in  anticipation  of  enhanced  values. 
The  labouring  class,  too,  complained  of  high  rents.    Also, 
the  proposed  Government  Valuation  of  Land  Act,  passed 
on  October  17,  1896,  promised  to  give  the  local  bodies  a 
convenient  basis  for  taxation  without  expense  to  them. 

For  all  of  these  reasons,  but  largely  through  the 
activity  of  a  few  "  single-taxers,"  the  Rating  on  Unim- 
proved Value  Act,  of  August  13,  1896,  was  passed, 
giving  the  local  bodies  a  third  option  in  regard  to  the 
basis  on  which  rates  might  be  levied.  The  bill  was 
first  introduced  as  part  of  the  General  Rating  Bill 
in  1893,  and  then  as  a  separate  bill  in  1894,  1895  and 
1896,  when  it  was  finally  passed.  In  every  case  the 
Upper  Chamber  was  responsible  for  its  rejection. 

Strange  to  say,    there  was  a  strong  country  element 
among  the  advocates  of  the  bill  and  many  of  the  best 
speeches  in  support  of  it  came  from  rural 
representatives,  while  some  of  the  best  Relation  to 
in  opposition  were   made   by   city   and  Single  Tax 
borough  members.    Several  speakers  who 
supported    the    bill    strongly    disavowed    any    leanings 


140     STATE  SOCIALISM  IN  NEW  ZEALAND 

towards  what  one  of  them  called  "that  infamous  proposal, 
the  single  tax."  On  the  other  hand,  Mr.  O'Regan,  an  ar- 
dent single-taxer,  declared  that  "even  Henry  George 
could  not  have  drafted  a  more  logical  bill  than  this." 
A  good  deal  of  reliance  was  placed  on  the  fact  that  a 
similar  act  had  been  passed  in  Queensland  in  1890. 
Indeed,  one  industrious  historian  unearthed  the  inter- 
esting discovery  that,  under  the  old  provincial  Ordinance 
of  1858,  rating  on  unimproved  values  had  been  in  oper- 
ation in  Taranaki  for  many  years.  The  Ordinance 
stated  that  "  within  the  town  district  an  uniform  rate 
per  cent,  to  be  assessed  on  the  value  of  all  lands  within 
the  district,  exclusive  of  all  buildings,  erections  and 
improvements  whatsoever,  shall  in  every  case  be  imposed, 
such  value  to  be  ascertained  as  hereinafter  provided." 
This  was  many  years  before  Henry  George  became  an 
influence  in  the  Colony. 

The  Act  provides  for  local  option  in  taxation,  in 
that  boroughs,  counties,  and  other  rating  bodies 
may  decide  as  to  whether  their  rates  shall  be  levied 
on  the  unimproved  value,  as  determined 
Local  Option  by  the  Government's  valuation,  or 
upon  the  annual  or  capital  value  of  real 
estate  as  formerly.  A  written  demand,  signed  by  from 
15  to  20  per  cent,  of  the  ratepayers,  according  to  the 
number  of  ratepayers  in  the  rating  district,  must  first  be 
presented  to  the  Chairman  of  the  district,  requesting 
that  the  Act  be  submitted  to  a  vote  of  the  ratepayers, 
and  the  vote  must  be  taken  between  twenty-one  and 
twenty-five  days  after  delivery  of  the  demand.  (The 
Rating  Act,  1908.) 

Under  the  original  Act  it  was  necessary  for  at  least 
one  third  of  the  ratepayers  to  vote,  and  a  majority  of 
their  votes  carried  the  proposal.     Because  of  this  pro- 


LOCAL  TAXATION  OF  LAND  141 

vision  the  Act  failed  to  be  carried  in  a  number  of  dis- 
tricts, but  now  the  Local  Government  Voting  Reform 
Act  provides  that  a  bare  majority  of  the  valid  votes 
recorded  is  sufficient  to  adopt  the  Act.  If  the  Act  is 
adopted,  no  rescinding  proposal  can  be  submitted  to  the 
ratepayers  until  the  expiration  of  at  least  three  years, 
and  if  a  rescinding  proposal  is  carried  no  adoption  pro- 
posal may  be  submitted  until  after  three  years  have 
elapsed. 

Section  20  of  the  Act  reads  as  follows: 

"  This  Act  shall  not  apply  to  water  rates,  gas  rates,  electric- 
light  rates,  sewage  rates,  or  hospital  or  charita- 
ble-aid rates." 

Exceptional 

The  reason  for  the  exclusion  of  these  Rates 
rates  was  that  they  represented  service 
to  buildings  alone.  In  committee  Mr.  O'Regan  moved 
an  amendment  having  for  its  object  the  levying  of  thess 
exceptional  rates  on  the  unimproved  value,  but  this  wae 
lost  by  a  large  majority.  (Parliamentary  Debates, 
Vol.  85,  p.  192.) 

A  similar  attempt  was  made  during  the  parliamentary 
session  of  1905,  when  a  bill  was  introduced  by  Mr 
Henry  George  Ell  to  amend  the  princi- 
pal Act  so  as  to  permit  the  local  authori-  Single  Taxers 
ties  to  levy  "  all  or  any  of  the  rates  men-  not  Satisfied 
tioned  in  Section  20  upon  the  unim- 
proved value."  This  proposal  excited  great  opposition 
and  a  spirited  debate,  and  the  bill  was  lost.  It  shows, 
however,  that  the  single-taxers  are  not  satisfied  with 
the  small  measure  of  land  taxation  which  they  have 
secured,  and  that  they  favour  local  option  only  as  a 
means  to  an  end,  and,  if  possible,  would  make  rating 
on  unimproved  values  not  optional  but  mandatory 
in  every  rating  district  in  the  Dominion.    (Parliamentary 


142      STATE  SOCIALISM  IN  NEW  ZEALAND 

Debates,  Vol.  132,  pp.  564-579.  Vol.  133,  pp.  692-719.) 
Up  to  March  31,  1909,  the  proposal  had  been  sub- 
mitted to  the  ratepayers  in  various  districts  103  times, 

had  been  adopted  in  81  districts  and  re- 
The  Act  in  jected  in  22,  but  in  4  of   these   it  was 

Operation  afterwards  carried.     In  the  year  1908  it 

was  carried  in  3  districts  and  rejected  in 
3.  On  March  30, 1908,  the  borough  of  North  East  Valley, 
which  had  adopted  the  Acton  January  12, 1905,  by  a  vote 
of  202  to  172,  voted  to  rescind  by  a  vote  of  354  to  185. 
This  is  the  first  case  of  rescission,  although  sev-eral  pro- 
posals to  rescind  have  been  defeated.  (Year-Book,  1909, 
p.  215.)  Until  recently  the  vote  has  seldom  been  a  large 
proprotion  of  the  total  ratepayers,  but  latterly  the  pro- 
posal has  been  more  stubbornly  contested.  In  the  con- 
test in  the  Borough  of  Birkenhead  on  February  9,  1910, 
441  votes  were  cast  out  of  a  total  of  620  voters  and  the 
proposal  was  rejected  by  a  majority  of  55.  Referring 
to  this  contest,  Mr.  Vaile,  a  strong  opponent  of  the  sin- 
gle-tax, says: 

"  Where  the  system  has  been  carried  in  this  country  it  has 
almost  always  been  by  surprise.  The  advocates  of  the  new  s^'stem 
canvassed  carefully  before  they  applied  for  the  poll  which  they  forced 
on  at  the  shortest  possible  notice;  very  few  went  to  the  poll  and  of 
course  the  single-taxers  had  the  advantage." 

The  indifference  of  many  ratepayers  is  probably  due 
chiefly  to  the  fact  that  the  rates  in  most  districts  are  not  a 
heavy  burden  upon  the  owners  of  prop- 
Indifference  of  erty.  The  general  Government  sup- 
the  Ratepayers  ports  the  public  schools  and  many  charit- 
able institutions,  spends  large  sums  of 
money  on  roads  and  other  public  w^orks,  bears  the  expense 
of  valuation,  and  even  grants  subsidies  to  the  local 
bodies.  The  chief  items  of  local  expenditure  are  for  roads, 
bridges,  drainage,  harbours,  charitable  aid  and  hospitals. 


LOCAL  TAXATION  OF  LAND  143 

Besides,  less  than  half  of  the  local  revenues  are  derived 
from  rates.  In  the  year  1907-08,  if  all  th'e  general  rates 
had  been  levied  on  the  unimproved  value,  the  tax  would 
have  been  about  one  half  of  one  per  cent,  upon  the  valua- 
tion. In  the  rural  districts  the  tax  would  have  been 
lower  than  this;  in  the  towns  it  would  have  been  higher. 
Rating  on  unimproved  values  is,  therefore,  by  no  means 
a  thoroughgoing  application  of  single-tax  principles. 

In  the  year  1906  the  New  Zealand  Government,  at 
request  of  the  British  Government,  sent  a  circular  letter 
to  all  the  local  authorities  rating  on  the 
unimproved  value,  requesting  informa-  Investigation  by 
tion  as  to  the  working  of  the  system.  Of  the  Government 
the  52  replies  received  about  38  were 
fairly  satisfactory,  but  only  a  few  covered  all  the  points 
about  which  information  was  desired.  The  following  is  a 
rough  classification  of  the  replies: 

1.  There  is  a  general  agreement  that  rents  have  not 
been  reduced,  and  that  the  incidence  of  taxation  has  been 
changed  so  as  to  fall  more  heavily  upon  unimproved  land 
and  upon  land  on  which  there  are  improvements  the  value 
of  which  is  less  than  the  unimproved  value.  Out  of  11 
opinions  concerning  the  justice  of  this  change  of  inci- 
dence, 4  say  that  it  is  more  equitable,  while  7  say  that 
it  is  unjust  or  onerous. 

2.  As  to  speculation  in  land,  15  say  that  it  has  been 
discouraged,  and  only  i  holds  the  contrary  opinion,  while 
3  say  that  vacant  sites  have  been  broken  up  and  put 
upon  the  market. 

3.  As  to  the  building  trade,  12  say  that  it  has  been 
encouraged,  8  think  that  it  has  not  been  affected,  i  says 
that  it  has  been  discouraged,  and  i  says  that  it  has  been 
unduly  stimulated  to  the  point  of  overcrowding. 

4.  Out  of  25  replies   expressing  opinions  as  to  the 


144     STATE  SOCIALISM  IN  NEW  ZEALAND 

general  popularity  of  the  system,  20  say  that  it  is  satis- 
factory or  beneficial,  and  5  say  that  it  is  not  so. 

The  replies  were  sent  to  the  British  Government,  to- 
gether with  a  memorandum  by  Mr.  P.  Heyes,  the  Com- 
missioner of  Taxes,  who  is  strongly  in 
Memorandum  favour  rating  on  unimproved  values. 
by  Mr.  Heyes  (Papers  relative  to  the  Working  of 
Taxation  of  the  Unimproved  Value  of 
Land  in  New  Zealand,  New  South  Wales,  and  South 
Australia.  London,  1906.)  His  report  is  more  favour- 
able than  the  somewhat  unsatisfactory  replies  of  the 
local  authorities  would  seem  to  warrant.     He  says: 

"  From  the  reports  received,  and  the  most  reliable  sources  of 
information  available  based  on  personal  observation  and  inquiry, 
I  am  of  opinion  that  the  effect  of  the  system  of  rating  on  the  unim- 
proved value  would  be  correctly  summarized  on  the  lines  required 
as  follows: 

"Building  Trade:  The  effect  has  certainly  been  to  greatly  stimu- 
late the  building  trade.  The  object  and  tendency  of  this  system  of 
taxation  is  to  compel  land  being  put  to  its  best  use,  so  that  the 
greatest  amount  of  income  may  be  derived  from  it,  and  rendering  it 
unprofitable  to  hold  land  for  prospective  increment  in  value.  It  has 
been  the  direct  cause  of  much  valuable  suburban  land  being  cut  up 
and  placed  on  the  market  and  thus  rendered  more  easily  available 
for  residential  purposes,  and  of  the  subdivision  of  large  estates  in 
the  country,  resulting  in  closer  settlement.  The  effect  on  urban 
and  suburban  land  has  been  vcr>'  marked.  The  rebuilding  of  this  city 
(Wellington)  which  for  some  years  past  has  been  rapidly  going  on  is 
largely  attributable  to  the  taxation  and  rating  on  land  values. 

"  Re7it:  The  tendency  of  this  sj'stem  of  taxation  is  not  to  increase 
rent,  but,  on  the  contrary,  as  the  tax  becomes  heavier,  it  tends  to 
bring  into  beneficial  occupation  land  not  put  to  its  best  use  and  so 
reduces  rent,  the  improvements  being  entirely  free  from  all  rates  and 
taxes.  In  some  cases  where  land  suitable  for  building  sites  is  limited 
high  rents  have  been  maintained,  notwithstanding  the  tendency  of 
the  system. 

"  Vacant  Sites:  The  effect  has  been  to  cause  vacant  sites  being 
put  to  their  best  use  by  expenditure  on  improvements.  On  vacant 
sites  the  rates  and  taxes  are  increased  and  continue  to  increase  as  the 
adjacent  sites  which  have  been  improved  increase  in  value.  It  thus 
becomes  unprofitable  to  continue  to  hold  land  unimproved. 

"Incidence  of  Taxation:  The  taxation  on  building  property, 
where  the  improvements  exceed  the  unimproved  value,  is  decreased; 
where  the  unimproved  value  exceeds  the  improvements  the  taxation 
is  increased. 


LOCAL  TAXATION  OF  LAND  145 

"Land  Speculation:  The  tendency  is  to  discourage  speculation 
as  the  tax  partially  or  wholly  discounts  the  rise  in  value,  but  land  spec- 
ulation has  not  ceased  in  some  districts  where  the  system  has  been 
adopted,  because  the  tax  has  not  been  sufficient  to  render  speculation 
unprofitable  in  large  cities,  and  because  of  the  rapid  increase  in  land 
values  in  spite  of  the  tax. 

"In  my  opinion  the  exemption  of  all  improvements  (in  con- 
junction with  the  Lands  for  Settlements  and  Advances  to  Settlers 
policy  of  the  Government)  has  to  a  large  extent  contributed  to  the 
solid  prosperity  of  the  Colony." 

Before  the  Government's  report  was  accessible  the 
present  writers  made  a  similar  investigation  by  means 
of  a  series  of  questions  sent,  in  December, 
1906,  to  the  clerks  of  all  the  local  bodies.        Another 
69  in  number,  that  had  adopted  the  Act.        Investigation 
Forty  replies  were  received,   of  which 
thirty-five  gave  fairly  satisfactory  answers.     The  ques- 
tions and  a  summary  of  the  replies  are  here  given : 

1.  Has  the  system  had  any  marked  effect  in  dis- 
couraging the  holding  of  land  for  speculative  purposes? 
Yes,  12;    no,  19;      indefinite,  4. 

2.  Has  the  system  unduly  forced  people  to  part  with 
land  used  for  private  gardens?  Yes,  4;  no,  22;  indefinite,  9. 

3.  Do  you  attribute  to  the  system  any  alteration  in 
the  prosperity  of  your  county,  district,  or  borough  ?  Yes, 
4;  no,  22;  indefinite,  9. 

4.  Has  the  system  caused  any  appreciable  increase 
of  buildings  or  other  improvements?  Yes,  12;  no,  14; 
indefinite,  9. 

5.  Has  the  system  caused  buildings  to  be  erected  in 
advance  of  requirements?    Yes,  3;    no,  32. 

6.  (a)  Do  you  consider  the  system  to  work  equitably? 
Yes,  19;  no,  9.  {h)  Do  you  know  of  any  cases  of  hard- 
ship?    If  possible,  give  details.    Yes,  14;   no,  10. 

7.  Has  it  had  any  effect  in  (a)  cheapening  land,  or 
(6)  making  it  easier  to  get?  (a)  Yes,  5 ;  no,  28.  (6)  Yes, 
12;   no,  22. 


146     STATE  SOCIALISM  IN  NEW  ZEALAND 

8.  Do  the  ratepayers  and  public  seem  satisfied  with 
the  system?    Yes,  22;    no,  3;    indefinite,  10. 

In  further  explanation  of  these  questions  and  answers 
it  should  be  noted: 

1.  The  tax  is  too  slight  to  have  any  marked  effect 
in  discouraging  speculation,  especially  in  view  of  the 

general  rise  in  land  values,  but  in  some 
Results  cases  weak  holders  have  been  compelled 

Insignificant         to  sell  to  Stronger  holders,  or  to  buyers 

of  small  lots  for  building, 

2.  In  a  few  places,  as  in  Wellington,  where  there  is  a 
great  scarcity  of  building  sites,  the  tendency  already 
existing  toward  overcrowding  has  been  increased.  A 
higher  tax  would  have  a  still  greater  effect  in  this  direc- 
tion. This  was  clearly  foreseen  by  the  present  Chief 
Justice,  Sir  Robert  Stout,  who  led  the  opposition  to  the 
bill  in  Parliament.  He  predicted  that  the  effect  of  the 
law  would  be  to  do  away  with  the  vacant  spaces  —  the 
lungs  of  the  cities.  Certainly,  the  taxation  of  unim- 
proved values  does  not  seem  to  be  in  harmony  with  the 
Garden  City  idea.  A  garden,  or  even  a  vacant  lot,  is 
often  more  of  an  "  improvement  "  to  a  neighbourhood 
than  a  building.  In  fact,  buildings  are  frequently  the  very 
opposite  of  "  improvements." 

3-4.  The  increase  of  buildings  and  other  improve- 
ments has  been  due  chiefly,  if  not  altogether,  to  the 
Prosperity  not  general  prosperity  of  the  country,  which 
due  to  Rating  in  its  turn  has  been  due  to  the  high 
on  the  Unim-  prices  for  wool,  mutton  and  dairy  produce 
proved  Value  ^|^^^  j^^^.^  prevailed  during  the  past  ten 
or  twelve  years.  Districts  where  the  old  system  of 
rating  has  been  retained  have  prospered  as  much  as  the 
others,  as  can  be  seen  by  an  examination  of  the  Census 
reports  for  1901  and  1906.    For  example,  two  of  the  sub- 


LOCAL  TAXATION  OF  LAND  147 

urbs  of  Auckland,  Devonport  and  Grey  Lynn,  under  the 
new  rating,  have  increased  in  population  by  35  and  43 
per  cent,  respectively;  yet  the  more  conservative  suburbs 
of  Remuera,  Mount  Albert  and  Epsom  show  gains  of  42, 
75,  and  112  per  cent.  The  total  population  of  the  21 
boroughs  which  adopted  the  Act  before  1904  show  an 
increase  in  population  of  24  per  cent.,  while  the  total 
population  of  all  the  boroughs  in  New  Zealand  has 
increased  by  22  per  cent.  The  total  population  of  the  10 
counties  where  the  Act  was  adopted  before  1904  has 
increased  by  10  per  cent.,  and  the  total  county  population 
of  New  Zealand  has  also  increased  by  10  per  cent.  So 
there  is  no  evidence  to  show  that  the  new  system  of 
rating  has  either  advanced  or  retarded  the  growth  of  the 
districts  in  which  it  has  been  adopted.    (Census  of  1906.) 

5.  The  Tax  is  not  sufficient  to  stimulate  building  to 
any  marked  extent;  but  if  it  were,  and  a  large  number  of 
people  improved  their  land  for  the  sake  of  securing  some 
revenue,  and  not  in  response  to  increased  demand,  rents 
in  general  would  fall,  and  the  owners  of  improved  prop- 
erty would  lose  as  much  as  they  had  gained  by  exemp- 
tion from  taxation,  or  more.  At  the  same  time  tenants 
would  gain,  for  a  time,  by  the  reduction  of  rents. 

6.  The  question  of  equity  has  transformed  itself  into 
a  question  of  the  interests  of  the  several  classes  con- 
cerned, and  ratepayers  commonly  vote 

A  Question  of  on  the  question  according  to  the  gain 
Class  Interests  or  loss  which  they  anticipate  as  the  result 
of  the  proposed  change.  There  are 
two  classes  of  owners:  those  whose  unimproved  value 
is  greater  than  the  value  of  their  improvements,  and 
those  who  own  a  relatively  greater  value  in  improve- 
ments. Owners  of  the  latter  class  are  well  satisfied  with 
the  rating  on  unimproved  values,  since  it  has  reduced 


148      STATE  SOCIALISM  IN  NEW  ZEALAND 

their  taxes.  Owners  of  the  former  class  complain  when 
their  taxes  are  materially  increased  ;  but  since  land  values 
have  increased  almost  everywhere,  and  the  rates  are 
not  very  high,  most  of  these  people  have  lost  nothing 
and  feel  no  great  burden  unless  they  hold  large  quanti- 
ties of  unimproved  land. 

There  are  many  individual  cases  of  hardship,  as 
when  a  poor  person  in  a  country  borough  has  a  vegetable 
garden  or  a  paddock  for  a  cow.  Some 
Cases  of  industries,    too,    such    as    lumberyards, 

Hardship  foundries,  and  dairies,  situated  within  a 

borough,  have  had  their  taxes  greatly 
increased,  or  have  been  compelled  to  move  into  the 
country.  In  the  case  of  a  borough  partly  urban  and 
partly  rural  the  system  presses  inequitably  upon  the 
more  rural  parts,  where  the  value  of  the  improvements  is 
small  in  proportion  to  the  unimproved  value.  Even  in  ur- 
ban districts  there  are  inequalities,  as  where  a  person 
owning  a  large  house  on  a  small  lot  pays  less  than  his 
neighbour  who  has  a  small  house  on  a  large  lot.  As  a 
rule,  however,  a  large  house  is  built  upon  a  large  piece  of 
land  and  a  small  house  upon  a  small  allotment.  More- 
over, rich  people  as  a  rule  own  more  unimproved  land 
than  poor  people.  Therefore,  the  adoption  of  the  new 
system  probably  involves  a  shifting  of  the  burden  of 
local  taxation  from  the  many  to  the  few,  from  the  rela- 
tively poor  to  the  relatively  rich,  who,  no  doubt,  are 
best  able  to  bear  it. 

Where  the  system  has  been  adopted  in  counties  con- 
taining towns,  the  taxes  on  rural  property  are  relatively 
increased,  so  that  the  country  people  complain,  and 
demand  a  system  of  diiTerential  rating,  or  a  separation 
of  the  towns  from  the  rural  districts  for  purposes  of 
rating.    Again,  in  rural  districts  the  rates  must  fall  more 


LOCAL  TAXATION  OF  LAND  149 

heavily  on  the  holdings  of  new  settlers  than  on  the 
improved  holdings  of  their  more  prosperous  neighbours. 

7-8.  Land  values  have  risen  greatly,  notwithstanding 
the  tax.  This,  together  with  the  slight  amount  of  the 
tax,  is  probably  the  cause  of  the  general  indifference  of 
ratepayers  to  the  question.  Many  of  the  ratepayers, 
if  not  a  majority,  have  had  their  rates  reduced  and  are 
well  satisfied  with  the  result.  The  working  class,  who 
are  interested  in  the  securing  of  lower  rents  and  who 
envy  the  prosperity  of  the  landowners,  are  largely  in 
favour  of  rating  on  unimproved  values,  but  only  rate- 
payers can  vote  on  the  question.  The  minority  who 
suffer  hardship  do  not  seem  to  have  sufficient  influence 
to  have  the  system  abolished. 

The  case  of  North  East  Valley  is  of  particular  interest 

since  it  is  the  only  district  that  adopted  the  system  and 

afterwards  abandoned  it.    The  borough 

has  a  population  of  4,467,  and  has  a  xt  ^,^tf** 

,   *^   ^  7  7  ,  ,  North  East 

very  large  area  contammg  garden  and  Valley 

dairy  farms.    It  adopted  rating  on  unim- 
proved values  on  January  12, 1905,  and  voted  for  rescis- 
sion on  March  30,  1908.     In  reply  to  the  Government's 
circular,  the  borough  reported  as  follows: 

"  Decreases  rates  on  buildings.  Increases  rates  payable  on  land. 
Encourages  building  operations.  Attracts  population.  Does  not 
materially  reduce  rents.  Oppresses  holders  of  land  unsuitable  for 
building.  Reduces  number  of  vacant  sites."  (Papers  relative 
Working  of  Taxation  of  the  Unimproved  Value,  p.  28.) 

In  reply  to  the  writers'  circular,  the  answers  were, 
in  brief: 

"  Discourages  speculation  in  land.  Forces  people  to  sell  private 
gardens  and  other  land.  Has  increased  prosperity,  causing  a  large 
increase  of  building  and  influx  of  population.  Has  not  unduly 
stimulated  building,  but  there  is  danger  of  this.  Is  hard  on  the 
farmer.  Differential  rating  should  be  allowed.  It  has  made  land 
cheaper  and  easier  to  get.  The  majority  are  eased  and  therefore 
satisfied.     The  minority  feel  the  additional  burden." 


I50     STATE  SOCIALISM  IN  NEW  ZEALAND 

The  radically  different  views  that  are  held  on  this 
subject  are  well  illustrated  by  the  opinions  of  Mr.  Maeky, 

who  was  Mayor  of  Devonport  in  1900, 
Opposing  Views  when    the    borough    adopted    the    new 

rating,  as  compared  with  the  views  of 
Mr.  Alison,  mayor  of  the  same  borough  a  few  years 
later.  Mr.  Macky  gave  twelve  reasons  in  favour  of 
the  new  rating,  as  follows: 

"  I.  It  has  removed  the  heavy  rates  formerly  charged  on  al' 
improvements. 

"  2.  It  has  greatly  encouraged  building. 

"3.  It  has  given  increased  employment  to  labour,  and  has 
encouraged  trade. 

"  4.  It  has  largely  lightened  the  taxation  on  almost  all  the 
inhabitants  of  the  borough,  who  have  made  Devonport  what  it  is. 

"5.  It  has  specially  reduced  the  rates  on  working-men's  homes 
and  small  residences. 

"  6.  It  has  reduced  rents  without  reducing  the  profits  of  the 
landlord. 

"  7.  It  has  encouraged  thrift  by  taking  off  an  injurious  tax  on 
industry. 

"  8.  It  has  discouraged  the  holding  of  unproductive  areas  for 
an  increased  value  caused  by  the  improvements  of  neighbours. 

"  9.  It  has  made  empty  allotments  bear  their  fair  share  of  taxa- 
tion. 

"10.  The  valuation  of  the  borough  costs  less  and  is  more 
equitable. 

"  II.  It  is  fair  and  just  to  all,  as  it  makes  those  pay  most  who 
get  the  greatest  pecuniary  benefit  from  the  rates  and  the  general 
expenditure  of  the  borough. 

"  12.  It  is  being  adopted  by  a  constantly  increasing  number  of 
boroughs,  counties  and  road  districts,  and  has  proved  a  success 
wherever  it  has  been  tried."  (Parliamentary  Debates,  vol.  133,  p. 
704,  August  16,  1905.) 

Very  different  are  the  opinions  of  Mr.  Alison,  who  says:  "  As 
Mayor  of  Devonport,  I  am  able  to  speak  with  some  authority  with 
regard  to  the  rating  on  unimproved  values,  and  I  have  no  hesitation 
in  saying  that  it  is  a  pernicious  system  —  a  system  which  is  entirely 
unsound  and  wrong  in  principle.  .  .  .  It  is  all  very  well  while  land 
is  appreciating  in  value,  whilst  you  can  sell  readily,  whilst  business 
is  buoyant,  whilst  tenants  for  houses  and  business  places  can  be 
readily  secured;  but  let  there  be  a  reversal  in  the  condition  of  things, 
and  houses  are  unsalable  and  untenanted,  then  the  injustice  which 
is  wrought  by  rating  on  the  unimproved  value  will  be  realized.  .  . 
The  tendency  of  the  system  is  to  encourage  owners  to  build  large 
houses  on  small  sections,  and  to  crowd  houses  together.  .  .  I 
could  quote  a  large  number  of  instances  at  Devonport  where  there 


LOCAL  TAXATION  OF  LAND  151 

are  working-men,  poor  men,  who  hold  two  allotments  and  a  small 
house,  whilst  almost  side  by  side  is  the  man  of  wealth  with  his 
mansion  on  a  lesser  area,  and  these  working-men  are  paying  higher 
taxation  than  the  wealthy  man.  .  .  .  The  majority  gain  benefit 
to  the  detriment  of  the  minority,  and  do  not  care  what  injustice  is 
imposed  so  long  as  they  gain  an  advantage  for  themselves."  (Par- 
liamentary Debates,  vol.  132,  p.  577,  July  13,  1905.) 

The  followers  of  Henry  George  give  a  glowing  account 

of  the  success  of  rating  on  unimproved  values  wherever 

tried.    The  Hon.  George  Fowlds  holds  that  land  taxes, 

both  general  and  local,  have  been  among  the  chief  causes 

of  the  prosperity  of  the  Dominion  during  the  past  ten  or 

twelve   years.      Mr.   Ell  is  strongly  in   favour   of   the 

system,  and  would  have  all  the  rates,  including  gas  and 

water  rates,  levied  upon  the  unimproved  value.     Mr. 

Laurenson  said  in  the  House: 

"  I  can  assure  you  that  the  rating  on  unimproved  values  system 
will  yet  be  adopted  in  every  municipality  in  New  Zealand.  In  the 
next  ten  years  it  will  be  adopted  in  connection  with  every  class  of 
rate  that  may  be  levied  in  this  Colony."  (Parliamentary  Debates, 
Vol.   132,  p.  577,  July  13,  1905.) 

But  the  facts  do  not  seem  to  warrant  optimistic 
conclusions  such  as  these.  The  benefits  of  rating  on 
unimproved  values  are  not  so  obvious  as  to  command 
unanimous  approval  or  to  persuade  all  the  rating  dis- 
tricts to  adopt  it  without  delay.  The  opposition  to  the 
system  appears  to  be  growing  stronger  as  the  people  are 
coming  to  recognize  its  relation  to  the  propaganda  for  the 
single-tax.  The  small  farmers  like  to  shift  the  burden  of 
taxation  from  their  own  shoulders  to  those  of  their 
wealthy  neighbours,  but  they  do  not  enjoy  the  game 
when  they  are  on  the  losing  side.  They  are  strong  sup- 
porters of  freehold  tenure,  and  will  not  readily  consent 
to  have  their  property  confiscated  by  any  radical  exten- 
sion of  the  principle  of  the  single-tax. 

The  growing  political  power  of  the  labouring  class, 
for  whose  benefit  much  of  the  recent  legislation  of  New 


152      STATE  SOCIALISM  IN  NEW  ZEALAND 

Zealand  has  been  enacted,  may  ultimately  bring  about 
the  nationalization  of  land,  but  surely  not  until  the 
Dominion  has  become  an  industrial  nation,  rather  than  a 
pastoral  and  agricultural  community  as  it  is  to-day. 
Up  to  the  present  time  the  effects  of  rating  on  unim- 
proved values  have  been  insignificant.  The  most  notable 
feature  of  the  system  is  the  shifting  of  the  burden  of  local 
taxation  from  one  class  of  taxpayers  to  another.  It  is  an 
interesting  phase  of  the  tendency  which  prevails  in  both 
New  Zealand  and  Australia  toward  an  equalization  of 
wealth  by  means  of  a  legal  transfer  of  the  property  of  the 
wealthier  classes  to  the  pockets  of  their  poorer  neighbours. 
How  far  this  process  will  go  it  is  impossible  to  foretell, 
but  that  its  ultimate  results  will  be  beneficial  to  the 
majority  of  the  people  is  by  no  means  certain. 


CHAPTER    IX 
STATE  LIFE  INSURANCE 

Statistics  show  that  the  death  rate  in  New  Zealand 
is  one  of  the  lowest  in  the  world.  In  the  year  1907 
it  was  10.95  per  1,000  persons  living, 
as  compared  with  10.58  for  New  South  Low  Death  Rate 
Wales;  15  for  England  and  Wales,  13.5  of  New  Zealand 
for  Denmark,  18  for  the  German  Empire, 
20  for  France  and  17.8  for  the  United  States.  (Year- 
Book,  1909,  p.  264;  U.  S.  Census,  1900,  Special  Report 
on  Mortality.)  Among  the  factors  which  contribute  to 
this  result  are  a  fine  climate,  a  sparse  population,  healthy 
occupations,  and  the  youthfulness  of  the  inhabitants. 
It  has  been  stated  that  the  last-mentioned  factor  is  the 
most  important  and  that  owing  to  the  diminishing  birth 
rate  it  will  not  be  long  before  a  substantial  increase  in 
the  death  rate  must  ensue.  And  yet,  the  death  rate  is 
practically  the  same  as  it  was  twenty-five  years  ago. 
("  The  Population  of  New  Zealand,"  by  H.  W.  Segar, 
M.  A.,  Transactions  of  the  New  Zealand  Institute,  1900, 
Vol.  33,  p.  445;  Year-Book,  1893,  p.  78.) 

In  another  respect  New  Zealand  beats  the  world,  for 
it  is  stated  that  its  inhabitants  carry  more  life  insurance 
in  proportion  to  their  numbers  than  the 
people   of  any   other   nation.      ("  State        Insurance 
Insurance  in  New  Zealand,"  Year-Book,        Popular 
1894,   P-   266.)     This   is   probably   due 
chiefly   to  the  wealth   and   intelligence  of  the  people, 
although  the  low  death  rate  may  have  something  to  do 
with  it.     In  the  year  1907  there  were  twelve  companies 

153 


154     STATE  SOCIALISM  IN  NEW  ZEALAND 

doing  life  insurance  business  in  the  Dominion  and  they 
had  issued  122,924  poHcies  which  insured  a  gross  amount 
of  £30,207,134  ($150,000,000).  (Year-Book,  1909,  p. 
538.)  This  is  a  large  amount  of  insurance  for  a  country 
with  a  population  of  about  900,000. 

The  State  Life  Insurance  Department  was  established 
in  1869  at  the  instance  of  Sir  Julius  Vogel,  who  was  at 
The  State  Life  that  time  a  private  member  of  the  Legis- 
Insurance  lature,  and  an  Act  was  passed  enabling 

Department  the  Government  to  grant  life  assurances 

Established  ^^^^  annuities  on  the  security  of  the  colo- 

nial revenue.  The  arguments  advanced  by  Vogel  are 
still  of  interest.  He  dwelt  on  the  great  risks  attending 
life  insurance  as  evidenced  by  the  failure  of  certain  Brit- 
ish offices,  and  claimed  that  the  State  was  the  only 
assurer  which  could  give  the  greatest  possible  amount  of 
security  at  the  least  possible  cost.  He  called  attention 
to  the  British  legislation  for  the  granting  of  govern- 
mental annuities  which  had  been  carried  by  Gladstone 
some  years  previously,  and  urged  that  in  a  young  coun- 
try where  there  were  so  many  changes  of  fortune  it  was 
specially  important  to  encourage  habits  of  thrift  and 
providence.  He  believed  that  the  only  way  to  popu- 
larize insurance  among  the  working  class  was  to  place 
the  security  of  the  State  behind  it.  The  time  was 
especially  opportune  since  there  were  no  vested  interests 
to  contend  with  —  no  local  life  assurance  companies. 
All  of  the  insurance  business  was  done  by  agents  working 
for  outside  companies  which  made  no  investments  in  the 
Colony. 

The  high  local  rate  of  interest  then  ruling  —  at  least 
5  per  cent.  —  was  another  great  advantage.  At  that 
time  the  tables  of  the  British  companies  were  framed  on  a 
3  per  cent,  basis,  so  that  there  would  be  a  large  margin  of 


STATE  LIFE  INSURANCE  155 

profit  if  the  funds  were  invested  in  the  Colony.  Vogel 
also  pointed  out  that  the  large  staff  of  Government 
officials  throughout  the  country  could  be  utilized  in 
carrying  on  branch  offtces,  and  that  by  this  means  the 
expenses  rate  would  be  kept  lower  than  that  of  private 
companies. 

Finally,  Vogel  saw  in  the  scheme  a  splendid  possi- 
bility of  placing  large  funds  at  the  disposal  of  the  State 
without  having  to  repay  for  many  years  either  principal 
or  interest.  The  scheme  would  be  advantageous  to  all 
concerned ;  the  assured  would  obtain  policies  at  low  rates; 
and  the  Government  would  have  the  use  of  their  money 
for  many  years  for  the  various  internal  improvements 
which  were  soon  to  be  undertaken.  However,  no  attempt 
was  actually  made  to  subordinate  the  Insurance  Depart- 
ment to  the  general  loan  policy  of  the  Government. 

The     Government     Insurance     Department     began 
operations  in  1870,  now  40  years  ago.    The  management 
is  vested  in  a  Commissioner  appointed 
by  the  Government.     The  Dominion  is      Methods  of 
divided  into  4  districts,  each  of  which  is      Business 
supervised  by  a  district  manager  who 
receives  a  fixed  salary  and  a  commission  on   the  net 
increase  in  business  for  the  year.     Where  there  is  no 
resident  officer  the  local  postmaster  is  employed.     Busi- 
ness is  conducted  on  much  the  same  lines  as  that  of 
private   mutual   life   assurance   offices.     All   the   usual 
classes  of  policy  are  issued  and  canvassers  are  employed  to 
obtain  new  business  and  paid -according  to  results.    The 
State  guarantees  that  all  contracts  will  be  duly  met  at. 
death  or  on  maturity  of  policies.     Annual  accounts  are 
audited  and  presented  to  Parliament;  and  every  three 
years  an  actuarial  investigation  is  made  and  all  profits, 
after  suitable  reserves  have  been  set  aside,  are  divided 
among  participating  policy  holders. 


156     STATE  SOCIALISM  IN  NEW  ZEALAND 

All  entrants  into  the  civil  service  are  obliged  by  law  to 
insure  in  the  State  office  on  a  combined  assurance  and 
Compulsory  and  annuity  plan.  In  return  for  monthly 
Voluntary  In-  deductions  amounting  to  about  5  per 
surance  of  Civil  cent,  of  salary,  the  Insurance  Depart- 
Servants  ment  gives  a  uniform  initial  insurance 

of  £100,  increasing  with  the  salary  until  the  age  of  60  is 
reached,  and  after  that  an  annuity  varying  with  the  age 
at  entry.  Those  who  elect  to  pay  a  small  extra  premium 
can  have  the  assurance  continued  beyond  the  age  of  60 
until  death.  This  scheme  was  initiated  in  1893.  In 
addition  to  this  compulsory  assurance,  many  civil 
servants  insure  voluntarily  in  the  State  office.  In  1905 
there  were  some  6,000  civil  servants  insured  in  the  State 
office,  and  of  the  total  yearly  premiums  paid  by  them, 
amounting  to  £44,800,  the  sum  of  £39,000  represented 
voluntary  premiums. 

For  some  years  after  it  began  operations,  the  De- 
partment's business  rapidly  increased,  its  only  competitor 
being  the  Australian  Mutual  Provident 
Rapid  Increase    s^^je^         Qn   June   30,  1873,   the  Com- 
of  Business  at  .     .  •'       ,  ,,    , 

pjj.gj.  missioner  reported      that  2,901    persons 

had  effected  insurances  for  an  aggre- 
gate sum  of  £1,085,649,  and  also  that  60  persons  had 
provided  endowments  amounting  to  £6,500,  while  17 
others  had  paid  for  annuities  of  the  value  of  £950  per 
annum."  (Official  Handbook  of  New  Zealand,  1875, 
p.  45,  article  by  Mr.  Woodward,  Public  Trustee.)  In 
the  year  1884  the  total  sum  assured  was  £6,135,636,  in 
1892  it  was  £8,036,220,  in  1897  it  was  £9,002,601,  and 
in  1907  it  was  £10,855,153.  (Handbook  of  1892,  p.  261 ; 
Year-Book,  1899,  p.  298;   Year-Book,  1909,  p.  538.) 

The  following  table  from  the  Official  Year-Book 
of   1909  shows  in  summary  form  the  position  of  the 


STATE  LIFE   INSURANCE 


157 


various  companies  carrying  on  business  in  New  Zealand 
in  so  far  as  their  New  Zealand  business  is  concerned: 


Name  of  Office 


Australian  Mutual  Provident 
Society 

Australasian  Temperance  and 
General  Mutual  Life  Assur- 
ance Society  (Limited).  .  .  . 

Australian  Widows'  Fund  Life 
Assurance  Society  (Lim- 
ited)  

Citizens'  Life  Assurance  Com- 
pany (Limited) 

Colonial  Mutual  Life  Assur- 
ance Society  (Limited).  .  .  . 

Equitable  Life  Assurance  So- 
ciety of  the  United  States.  . 

Mutual  Life  Association  of 
Australasia 

National  Mutual  Life  Associa- 
tion of  Australasia  (Lim- 
ited)  

New  York  Life  Insurance 
Company 

Scottish  Metropolitan  Life 
Assurance  Company  (Lim- 
ited)  

Yorkshire  Insurance  Company 

Life  Insurance  Department 
of  the  New  Zealand  Govern- 
ment   

Totals,  December,  1907 
Totals,  December,  1906 


Number  of 

Years  of 
Business  in 

the 
Dominion 


New  Zealand  Business  Only 


Number  of      i  Gross  Amount 
Existin.i;  Policies       Insured  by 
at  End  of  Year     Policies  at  End 
1907  I    of  Year  1907 


10 
14 
24 
23 
31 

28 
21 


II 

6 


38 


36,253 
2,475 

3,232 
5,693 
5,477 
1,871 
8,044 

11,961 

788 

9 
176 

46,945 


122,924 
118,265 


£ 
9,923,173 

258,644 

799,480 
924,464 

1,302,070 
669,142 

1 ,908,722 

3,261,397 
269,839 

3,600 
31,450 

10,855,153 


£30,207,134 
£29,036,047 


It  will  be  seen  that  in  1907  the  State  Office  carried 
a  greater  total  of  insurance  in  New  Zealand  than  any 
single  company.      It  also  held   no  less 
than  38  per  cent,  of  the  existing  policies.  Competition    of 
T-u-  .  r       1-   •      1.      \  Private    Com- 

1  his  percentage  01  policies  has,  however,  ponies 

steadily   declined    during   recent   years. 


158     STATE  SOCIALISM  IN  NEW  ZEALAND 


In  1893  it  was  over  49  per  cent.  From  1897  to  1907 
the  amount  of  assurance  in  force  increased  from  £9,002,- 
601  to  £10,855,153,  or  20  per  cent;  in  the  same  time 
the  business  of  the  Australian  Mutual  Provident  Society 
increased  from  £6,640,252  to  £9,923,173,  or  50  per  cent. 
In  1906  it  was  stated  in  one  of  the  Department's  pub- 
lications that  "  the  Colony  is  vigorously  canvassed 
by  travelling  agents,  who  obtain  tlie  vast  bulk  of  the 
new  business "  (A  Brief  Survey  of  New  Zealand's 
State  Life  Insurance,  specially  prepared  for  distribution 
at  the  New  Zealand  International  Exhibition,  Christ- 
church,  1906-07),  but  this  statement  must  have  referred 
to  an  earlier  period,  since  for  a  number  of  years  the  bulk 
of  new  business  has  been  done  by  the  A.  M.  P.  and  other 
private  companies.  From  1897  to  1907,  while  the  busi- 
ness of  the  State  office,  as  measured  by  amount  of  insur- 
ance in  force,  increased  by  20  per  cent.,  the  business  of 
all  the  private  companies  taken  together  increased  from 
£10,855,153  to  £19,351,981,  or  78  per  cent. 

The  premiums  charged  by  the  State  office  are  usually 
less  than  those  of  any  private  company.  The  follow- 
ing table  shows  a  comparison  with  three  of  the  chief 
private  companies  for  a  whole  life  ("  straight  life  ") 
policy  of  £100:  (Australasian  Life  Assurance  Societies, 
19th  Edition,  1905.) 


Age  at 

New  Zealand 

A.  M.  P. 

Mutual   Life 

National  Mutual 

Entry. 

Government  Life. 

Society. 

Association 

Life. 

20 

£1:     15:     7 

£1:      17:      5 

£1:     17:     0 

£1:      16:      9 

30 

£2 

,S 

S 

£2 

8 

2 

£2 

7 

0 

£2 

6 

8 

40 

i'^ 

I 

?, 

£3 

4 

5 

£3 

3 

0 

£3 

I 

6 

50 

£4 

9 

2 

£4 

9 

10 

£4 

II 

0 

£4 

7 

2 

During  the  first  fifteen  years  of  its  existence  the  State 
office  made  no  attempt  to  provide  bonuses,  and  there- 


STATE  LIFE  INSURANCE 


159 


fore  framed  its  rates  of  premium  on  an  even  lower  scale 
than  that  obtaining  at  the  present  time.  It  was  dis- 
covered, however,  that  it  was  necessary  to  provide 
bonuses  in  order  to  attract  new  business,  hence  the 
present  rates  have  been  in  force  since  1885. 

The  simplest  and  most  popular  method  of  calculating 
the  expenses  of  a  life  office  is  to  take  the  total  expenses 
and  calculate  the  ratio  that  this  total 
bears  to  the  total  income  or  the  premium    Low  Expense 
income  of  the  office.    On  this  basis  the    Ratio 
State  office  when  compared  with  other 
offices  of  anything  like  its  own  size  and  age  stands  out  as 
by  far  the  most  cheaply  managed.     Only  two  private 
offices  show  a  lower  ratio  of  working  expenses,  as  appears 
from  the  following  table:     (Australian  Life  Assurance 
Companies,    1905.) 


Name 


Percentage 

of  expenses 

on 

premium 

receipts, 

excluding 

consiaera- 

tion  for 

annuities 


Percentage 

of  expenses 

on  total 

receipts 

from 

premiums 

and 
interest, 
'excluding 
considera- 
tion for 
annuities 


Australian  Mutual  Provident  Society 
Government  Life  Insurance  Office.  .  . 
National  Mutual  Life  Association.  .  . 

Mutual  Life  Association 

Colonial  Mutual 

Citizens'  Life  Assurance  Co 


13.2 
18.9 
20.0 
21  9 
13.2 


Of  these  offices  the  National  Mutual  affords  the  fair- 
est comparison  with  the  State  office.     It  has  about  the 
same    amount    of    funds    accumulated, 
although  it  has  a  larger  income  both  from  Cotyiparison 

.  ,  .  r-  ,       ,       With  the 

premmms  and  mterest.     frequently  the  ^  m   P  Society 

State  office  has  been  criticised  in  Parlia- 


i6o     STATE  SOCIALISM  IN  NEW  ZEALAND 

ment  and  elsewhere  because  its  expense  rates  are  higher 
than  the  A.  M.  P.  Society.  In  1902  the  Commissioner 
made  the  following  reply  to  this  criticism : 

"  The  lower  ratio  in  the  case  of  the  A.  M.  P.  Society  arises  to 
some  extent  because  of  the  age  of  that  Society.  It  was  established 
many  years  before  the  Government  Department  was  inaugurated; 
consequently  a  vast  volume  of  business  was  accumulated,  practi- 
cally without  opposition.  Other  reasons  partially  accounting  for 
the  difference  may  also  may  advanced: 

"  (a)  Because  the  premiums  of  the  A.  M.  P.  are  considerably 
higher  than  those  of  the  Department. 

"  (b)  Because  the  Government  Insurance  Department  has  to 
pay  Land  and  Income  Tax  on  the  whole  of  its  business,  whilst  any 
similar  payments  the  A.  M.  P.  Society  may  have  to  make  in  Aus- 
tralia are  small  in  comparison.  But  if  the  expenses  of  management 
were  adjusted  and  allowance  made  for  the  higher  premiums  charged 
by  the  A.  M.  P.  Society,  as  well  as  for  a  fair  proportion  of  head 
office  expenses  and  a  fair  proportion  of  expenses  for  the  actuarial 
work,  which  in  the  case  of  the  A.  M.  P.  Society  is  all  done  at  Sydney, 
there  is  practically  no  difference."  (Quoted  in  Parliamentary  De- 
bates, vol.  120,  p.  257.) 

Thus  far  we  have  been  dealing  with  the  simple  method 
of  arriving  at  the  amount  of  working  expenses,  but 
Another  Method  although  it  is  the  method  adopted  by 
of  estimating  most  financial  journals  it  does  not  afford 
the  Expense  a  true  means  of  comparison.     On  this 

Ratio  basis   a   stagnant  office,   one   writing   a 

small  amount  of  new  business  in  comparison  with  the 
renewals,  must  show  a  lower  expense  rate  than  an  office 
with  a  similar  renewal  income  writing  a  larger  amount 
of  new  business. 

If  we  adopt  the  plan  followed  by  technical  writers, 
the  State  office  shows  much  less  favourable  results  in 
regard  to  working  expenses.  This  method,  it  is  true,  is 
somewhat  arbitrary,  but  is  perfectly  fair.  It  consists 
in  assuming  either  (i)  that  the  renewal  expense  is  yj^ 
per  cent,  of  the  total  expenses,  from  which  the  expense  of 
new  business  can  be  found,  or  (2)  that  the  new  business 
rate  of  expense  is  ten  times  the  renewal  rate,  so  that, 
if  the  latter  is  7.5  per  cent.,  the  former  is  75  per  cent. 


STATE  LIFE   INSURANCE  i6i 

The  latter  [e  perhaps  the  fairer  method,  and  a  comparison 
of  the  National  Mutual  with  the  State  Office  shows  that 
the  former  works  at  9.4  per  cent,  and  94  per  cent., 
respectively,  while  the  latter 's  expense  rates  are  10.6 
per  cent,  and  106  per  cent.,  respectively. 

The  true  reason  why  the  State  Office  makes  such  a 
good  showing  by  the  popular  method  now  becomes  ap- 
parent. In  the  year  in  question  the  State  Office  wrote 
only  one  fourth  of  the  new  business  written  by  the 
National  Mutual,  while  its  renewal  income  was  over  half 
that  of  the  latter  office.  Had  the  State  Office  written 
half  as  much  new  business  as  the  National  Mutual,  the 
percentage  of  expenses  on  premium  receipts  would  have 
been  considerably  higher  than  that  of  the  National 
Mutual.  In  other  words,  the  low  w^orking  expenses 
of  the  State  Office  are  attributable  much  more  to  slow 
progress  than  to  any  remarkable  economy  in  manage- 
ment. 

The  amount  of  bonuses  which  a  policy  will  probably 
carry  with  It  always  forms  a  more  forcible  argument  to 
the  prospective  assurer  than  any  con- 
sideration  of  working  expenses.      It  is        Bonuses 
not  easy  to  make  any  fair  comparison 
between  the  various  offices  because  of  discrepancies  in 
their  ages  and  the  conditions  of  their  policies.    But  the 
following  table  shows  the  annual  rates  of  bonus  declared 
on  a  whole  life  policy  of  £100  where  the  assurance  was 
affected  at  the  age  of  20  and  the  policy  had  been  in  force 
for   15  years:     (Australasian  Life  Assurance  Societies, 

I9^5v  Revisionary  Cash 

bonus  value 

Citizens  Life £3:       o:  o  £0:  17:  9 

A.  M.  P.    Society 2:     18:  o  o:  17:  7 

National  Mutual i:     18:  8  o:  10:  6 

New  Zealand  Government  Life i:       3:  4  o:  7:  i 

Mutual  Life o:     12:  5  o:  3:  6 

Colonial  Mutual o:       8:  o  o:  2:  8 


i62     STATE  SOCIALISM  IN  NEW  ZEALAND 

In  the  above  table  it  will  be  seen  that  the  State  Office 
takes  fourth  place.  It  is  on  the  question  of  bonuses  that 
the  State  Office  is  likely  to  suffer  most  in  competition  with 
other  offices,  unless  it  can  make  a  better  showing  in  the 
future  than  it  has  done  in  the  past.  The  Department, 
of  course,  does  not  acknowledge  inferiority  to  any  com- 
pany in  any  respect.  The  Commissioner,  in  his  Report 
for  1907,  says: 

"The  progress  of  the  Department  has  been  well  maintained 
through  the  operations  of  the  year.  The  new  business  returns  have 
again  improved,  and  there  have  been  satisfactory  increases  in  both 
the  interest  and  premium  income.  The  mortality  experience  has 
continued  to  be  favourable,  and  an  interim  actuarial  valuation  of 
the  liabilities  under  policies  in  force  shows  that  the  profit  resulting 
from  the  year's  business  has  been  highly  satisfactory,  auguring  well 
for  the  bonus-distribution  due  at  the  end  of  next  year."  (Annual 
Report  of  the  Government  Insurance  Commissioner,  1907;  Actu- 
ary's Report,  1906.) 

Perhaps  the  following  table  will  give  a  more  concise 
and  accurate  comparison  on  the  question  of  premiums  and 
bonus  rates  than  can  be  gathered  from  the  foregoing  de- 
tails, since  it  shows  the  original  sum  that  can  be  assured 
for  a  premium  of  £10,  and  the  amounts  to  which  it  will 
accumulate  by  addition  of  bonuses.  The  figures  are  for 
the  age  of  20  at  entry;  for  other  ages  the  results  are  very 
similar. 


Age,  20. 

Premium 

of 

£10  per 

annum. 

Year 

A.  M.  P. 

Citizens.  National  Mutual. 

Government. 

Mutual  Life. 

0 

£534 

£532 

£544 

£562 

£540 

5 

587 

569 

587 

590 

561 

10 

667 

617 

636 

618 

578 

15 

742 

698 

685 

651 

592 

20 

822 

7.39 

688 

610 

25 

902 

816 

724 

631 

30 

977 

762 

643 

The  percentage  of  policies  which  lapse  forms  one  of 

the  weakest  features  of  the  State  Office. 

A  writer  in  the  Sydney  Bulletin,  who  has 

usually  a  good   word  for  the  State  Office,  writing  in 

1907, says: 


STATE  LIFE  INSURANCE  163 

"  A  worse  trouble  by  far  with  the  Maoriland  office  is  the  lapse 
rate.  Maoriland  on  account  of  its  prosperity  ought  to  show  few  for- 
feitures. Yet  the  State  Office  has  a  disheartening  record.  .  .  While 
19.7  per  cent,  of  the  total  discontinuances  in  the  A.  M.  P.  Office 
were  due  to  forfeiture  of  policies,  47  per  cent,  in  the  Maoriland  State 
Office  were  due  to  that  cause.  Or,  in  another  way,  while  0.6  per 
cent,  of  the  amount  insured  with  the  A.  M.  P.  lapsed  last  year,  no 
less  than  3.9  per  cent,  or  more  than  six  times  more  in  proportion 
lapsed  in  the  State  Office.  No  doubt  the  A.  M.  P.  office  figures  are 
particularly  good,  but  the  State  office  figures  should,  from  the  very 
nature  of  the  office,  be  particularly  good.  Possibly  the  office  suffers 
because  it  is  confined  to  the  State.  If  a  man  moves  from  one  part  of 
Australia  to  another  or  from  Maoriland  to  Australia,  the  A.  M.  P. 
office  does  not  lose  him.  But  if  a  small  policy  holder  moves  out  of 
Maoriland,  the  chances  are  that  with  no  local  office  to  pay  the 
premium  to  he  will  drop  out.  That  may  be  the  explanation.  At  any 
rate,  the  matter  calls  for  enquiry.  For  it  is  a  tremendous  drag  on  an 
office  to  pursue  new  business  and  then  lose  it  after  a  year  or  two." 

And  the  writer  ends  up  by  estimating  that  it  costs  the 
State  Office  over  two  years'  premiums  to  secure  a  policy 
holder. 

The  figures  quoted  appear  to  be  correct,  but  removals 
could  account  for  only  a  small  proportion  of  the  total 
lapses.  A  much  more  likely  suggestion  has  been  made. 
Other  leading  offices  furnish  their  canvassers  and  agents 
with  a  horse  and  trap  which  enables  them  to  go  into  the 
country  and  get  business  from  well-to-do  farmers.  The 
State  agents  are  not  so  furnished  and  accordingly  confine 
their  efi'orts  to  the  towns  where  competition  is  keener 
and  the  average  policy  much  smaller. 

Again,  the  State  Office  pays  its  agents  full  commission 
on  what  are  known  as  "  quarterly  cases,"  that  is,  cases 
which  pay  their  premiums  by  quarterly  instalments. 
If  these  cases  lapse  after  one,  two  or  three  quarters  have 
been  paid,  the  State  Office  debits  the  agent  with  the 
instalments  unpaid,  but  if  the  agent  leaves  the  State 
Office,  the  refund  cannot  be  collected  and  the  State  Office 
loses  part  of  the  commission. 

Whatever  the  causes  may  be  it  remains  clear  that  the 


i64     STATE  SOCIALISM  IN  NEW  ZEALAND 

lapse  rate  is  far  too  high  and  that  steps  shcjuld  have 
been  taken  long  ago  to  check  it. 

In  1 891  the  State  Ofifice  showed  the  lowest  interest 
earnings  of  the  nine  Australasian  offices  then  doing 
business,  but  in  1900  it  stood  third  on 
Investments  the  list.  In  the  interval  the  rate  of  inter- 
est fell  steadily,  but  the  decrease  in  the 
case  of  the  State  Office  was  less  than  that  of  any  private 
ofifice,  because  it  had  not  so  far  to  fall.  The  earnings 
of  the  State  Office  fell  from  4.95  per  cent,  in  1896  to 
4.51  per  cent,  in  1905. 

The  funds  of  the  State  Office,  like  those  of  the  private 
offices,  are  invested  chiefly  in  mortgages  on  land,  and  in 
government  and  municipal  debentures.  But  it  is  a  curi- 
ous fact  that  the  State  Office  has  now  a  larger  percentage 
of  its  investments  in  mortgage  loans  than  any  private 
office  except  one.  It  might  be  thought  that  the  State 
Office  would  show  an  undue  inclination  to  put  the  assur- 
ance funds  into  State  loans,  but  since  1902  the  tendency 
has  been  the  other  way.  The  probable  explanation  is 
that  a  higher  rate  of  interest  is  required  to  allow  of 
higher  bonuses.  In  this  matter  the  State  Office  occupies 
a  delicate  position,  for  the  Government  may  be  tempted 
to  sacrifice  the  interests  of  the  policy-holders  to  its  need 
for  money.  For  example,  it  was  alleged  that  this  was 
done  in  1898  when  the  Government  gave  the  State  Insur- 
ance Department  3  per  cent,  debentures  at  par  in  ex- 
change for  debentures  to  the  value  of  £625,000,  the  bulk 
of  which  had  carried  interest  at  4  1-2  per  cent,  and  the 
balance  at  4  per  cent.  The  transaction  occasioned  con- 
siderable outcry  at  the  time  and  indicates  a  danger  to 
which  the  State  Office  is  peculiarly  liable. 

The  conclusion  which  emerges  seems  clear  that,  while 
the  State  Office  proved  fairly  successful  in  its  earlier 


STATE  LIFE  INSURANCE  165 

years,    its    present    position    is    unsatisfactory.      It    is 
difficult  to  see  why  the  Office  has  not  held  The  State  Office 
its  own  better  in  recent  years.    The  fact  not  doing  its 
that  it  has  behind  it  all  the  prestige  of  Sliare  of  New 
the  State,  that  its  contracts  are  guaran-  Business 
teed  by  the  State,  that  all  new  entrants  into  the  civil 
service  must  insure  with  it,  and  that  its  agents  have  the 
same  monetary  incentive  to  exertion  as  the  agents  of 
private  companies,  should  be  sufficient,  one  would  think, 
to  keep  the  office  in  the  front  rank.    But,  as  we  have  seen, 
its  bonuses  are  outclassed  by  several  competitors;  its 
lapse  rate  is  abnormally  high ;  and  it  is  not  getting  its 
proper  share  of  new  business. 

The  explanation  usually  offered  by  State  officials  is 
that  the  office  is  confined  to  New  Zealand  and  that  its 
range  is  too  limited.  They  point  to  the  fact  that  even  so 
powerful  a  company  as  the  A.  M.  P.  has  found  it  neces- 
sary in  recent  years  to  go  outside  of  Australasia  for  new 
business.  But  it  seems  doubtful  if  this  explanation  is 
well  grounded.  If  the  State  office  cannot  hold  its  busi- 
ness in  New  Zealand,  it  will  not  do  so  elsewhere. 

Another  factor  which  may  account  in  a  slight  degree 
for  the  slow  progress  of  the  State  office  is  the  large  num- 
ber of  superannuation  schemes  which  are  being  instituted 
in  connection  with  all  branches  of  the  Civil  Service. 
These  are  compulsory,  and  the  contributions  which  they 
call  for  may,  perhaps,  render  it  difficult  for  civil  servants 
to  insure  for  large  amounts  with  the  State  office. 

Failing  any  other  explanation ,  it  can  only  be  concluded 

that  there  is  no  one  sufficiently  interested  to  instill  the 

necessary  enthusiasm  into  the  officers  and  ^ 

rr^  ,  '11       Tendency  to 

agents.     True,  the  agents  are  paid  by  stagnation 

results,  but  that  is  no  guarantee   that 

their  work  will  be  carried  on  with  the  enthusiasm  and 


i66     STATE  SOCIALISM  IN  NEW  ZEALAND 

rivalry  that  characterizes  men  engaged  in  building  up  a 
private  office.  Perhaps  a  sense  of  patriotism  should  lead 
people  to  insure  in  the  State  office  without  the  efforts  of 
canvassers.  If  they  did  so,  the  State  office  could  easily 
outdistance  its  rivals.  But  failing  this,  the  only  way  is  for 
the  Department  to  display  the  same  energy,  economy  and 
efficiency  as  private  offices.  Unless  it  does  so,  and  does  it 
quickly,  there  will  be  an  increeising  tendency  to  stagna- 
tion, and  the  opponents  of  State  enterprise  will  be  fur- 
nished with  another  illustration,  and  that  in  a  field 
which  seems  more  adapted  for  successful  State  enter- 
prise than  almost  any  other. 


CHAPTER  X 

STATE  FIRE  INSURANCE 

The  State  Life  Insurance  Department  was  begun  at 
a  time  when  there  were  no  vested  interests  to  oppose  its 
introduction,  but  the  State  Fire  Insur-    Agitation  for 
ance  Office  was  estabHshed  only  in  1903    the  Establish- 
after  many  years  of  intermittent  agita-    ment  of  State 
tion  in  favor  of  it  and  a  ceaseless  opposi-    * '*"®  Insurance 
tion  on  the  part  of  the  private  companies.     In  1896,  a 
meeting  of  delegates  representing  various  Fire  Insurance 
Protection  Associations  passed  the  following  resolution: 

"  That  fire  insurance  for  the  protection  of  buildings,  stock  and 
effects  is  a  necessity  of  private  and  commercial  life:  that  the  busi- 
ness of  fire  insurance  in  the  past  has  been  profitable  to  the  companies 
trading  in  New  Zealand:  that  insurance  from  the  powerful  combina- 
tion of  the  insurance  companies  has  become  a  monopoly  and  that 
the  insured  are  expected  to  accept  whatever  tariff  the  combined 
companies  choose  to  impose:  that  life  insurance  by  the  State  has 
been  a  success,  and  the  delegates  present,  representing  large  interests, 
are  unanimously  of  opinion  that  the  time  has  arrived  for  the  estab- 
lishment of  a  State  Fire  Insurance  Department:  that  it  should  be  on 
the  mutual  principle  and  should  be  compulsory  so  far  as  all  build- 
ings are  concerned  and  optional  for  stock  and  effects:  that  the  Gov- 
ernment be  requested  to  at  once  give  its  earnest  consideration  to 
the  promotion  of  such  a  scheme."  (Quoted  in  Parliamentary  De- 
bates, vol.  124,  p.  570.) 

In  the  same  year  a  bill  was  introduced  into  Parlia- 
ment to  provide  for  State  Fire  Insurance,  but  it  failed  to 
pass.  By  1902  the  agitation  had  become  strong  enough 
to  lead  the  Government  to  introduce  a  bill  framed  on 
the  lines  of  the  resolution  just  quoted.  The  numerous 
insurance  companies  trading  in  New  Zealand  became 
alarmed,  and  started  a  vigorous  campaign  against  the 
proposal,  both  in  Parliament  and  in  the  press.    The  Bill 

167 


i68      STATE  SOCIALISM  IN  NEW  ZEALAND 

was  referred  to  a  committee  which  collected  a  large 
amount  of  conflicting  information  on  the  question  of  the 
fairness  of  the  existing  rates. 

In  the  following  year  a  new  bill  was  introduced 
from  which  the  compulsory  clauses  of  the  previous  bill 

were  eliminated.  The  chief  argument 
Arguments  in  advanced  in  Parliament  in  support  of 
Favour  of  the        ,  .    ,  .,i  i  •      .         r  ,. 

Proposal  ^"^^  ""^  ^^^y  °^  summarized  as  follows: 

(Parliamentary  Debates,  vol.  120,  pp. 
229-257;  Parsons,  Story  of  New  Zealand,  pp.  571-579). 

1.  It  was  alleged  that  huge  profits  were  being  made 
by  the  27  private  companies  doing  business  in  New  Zea- 
land, and  their  large  dividends  and  yearly  additions  to 
reserves  were  quoted  in  support  of  this  contention. 

2.  The  success  of  the  State  Life  Insurance  Depart- 
ment, the  Public  Trust  Office,  and  other  State  under- 
takings was  insisted  on  as  showing  the  feasibility  of  the 
new  proposal. 

3.  The  private  companies  were  stated  to  have  formed 
a  ring,  and  to  be  in  the  habit  of  laying  down  arbitrary 
and  unreasonable  conditions. 

4.  Assuming  that  experience  showed  that  business 
could  not  be  profitably  carried  on  at  lower  rates  than 
those  imposed  by  the  private  companies,  it  would  be  o.n 
easy  matter  for  the  State  to  close  up  its  Department  at 
the  end  of  the  year,  since  no  distant  obligations  would 
have  been  incurred,  as  in  life  insurance,  and  no  heavy 
capital  expenditure,  as  in  coal  mining. 

5.  Many  of  the  companies  were  owned  by  foreign 
capitalists,  and  the  country  was  being  annually  drained 
of  huge  sums  which  were  paid  in  dividends  to  foreign 
shareholders.  A  State  Fire  Insurance  Ofitice,  it  was  held, 
would  keep  this  wealth  in  the  country. 

6.  The  State  could  offer  better  security  than  any 
private  company. 


STATE  FIRE  INSURANCE  169 

The  chief  arguments  advanced  in  reply  were  these : 

1.  The  private  companies  were  not  making  undue 

profits,  and  it  was  misleading  to  quote  their  dividends, 

as   most   of    their    profits    were   earned 

abroad.    The  rates  in  New  Zealand  were  Arguments 

,  .  against  the 

the  result  of  many  years  experience,  and  Proposal 

any  reduction  would  involve  carrying  on 

business  at  a  loss.    Statistics  showed  that  while  in  some 

years  the  companies  made  15  or  20  per  cent.,  in  others 

they  had  heavy  losses,  and  their  average  profits  over  a 

series  of  years  were  between  4  and  5  per  cent. 

2.  It  was  misleading  to  rely  on  the  analogy  of  life 
insurance,  in  which  risks  and  liabilities  could  be  measured 
with  fine  accuracy.  "  There  is  nothing  more  risky  or 
more  highly  speculative  under  the  sun  than  fire  insurance 
and  no  enterprise  more  unsuited  for  a  Government  to 
undertake." 

3.  It  was  unfair  for  the  State  to  pit  the  country's 
patronage,  influence  and  public  funds  against  private 
enterprises,  which  had  done  all  the  pioneering  work  and 
had  made  the  business  a  success. 

4.  The  experience  of  Switzerland  had  shown  that  the 
compulsory  insurance  of  buildings  and  their  contents 
was  the  backbone  of  the  scheme.  The  compulsory 
clauses  having  been  eliminated  from  the  bill,  the  only 
justification  for  it  was  gone. 

5.  Political  influence  and  the  characteristic  ineffic- 
iency of  governmental  management  would  prevent  any 
chance  of  success. 

6.  The  State  office  would  not  be  able  to  get  re- 
insurance from  any  other  office,  and  the  risk  was  too 
great  for  it  to  carry  alone. 

7.  The  area  of  operation  would  be  too  small,  as  a 
population  of  less  than  1,000,000  did  not  afford  sufficient 


I70     STATE  SOCIALISM  IN  NEW  ZEALAND 

scope  for  the  working  out  of  averages.  Also,  New  Zea- 
land was  one  of  the  most  dangerous  fields  known  to 
insurance  companies. 

The   opposition    to   the   bill   by   the   Underwriters' 
Association  was  all  the  more  keen  because  it  was  recog- 
nised that  if  the  Government  of  New 

_  „       .      Zealand  were  successful  in  the  fire  insur- 

Trust  alleged  i       •  , 

to  Exist  ance  busmess,  the  governments  of  other 

countries  might  follow  suit.  A  strong 
section  of  the  press  championed  the  cause  of  the  under- 
writers, and  did  its  best  to  show  that  profits  were  not 
unduly  high  for  so  speculative  a  business,  and  that  if 
profits  did  appear  high  it  was  because  of  the  necessity 
of  building  up  strong  reserves.  The  private  insurance 
companies  pointed  with  pride  to  the  fact  that  they  were 
modelled  after  the  pattern  of  the  world-famous  English 
companies  whose  stability  had  been  demonstrated  in  a 
remarkable  manner  in  settling  losses  after  great  fires  in 
Chicago,  Jamaica  and  elsewhere.  However,  in  spite  of 
all  opposition,  the  bill  passed  into  law  with  the  approval 
of  the  people  as  a  whole,  who  were  convinced  that  the 
private  companies  had  formed  a  ring  and  were  exploiting 
the  community. 

The  State  Fire  Insurance  Act,  1903,  provides  for  the 
establishment  of  an  office  to  be  administered  by 
a   general  manager  appointed   by   the   Governor,    and 

for  the  necessary  stafT.  There  is  a  Board 
The  Act  of  1903    of  Management  consisting  of  the  General 

Manager,  the  Colonial  Treasurer,  the 
Government  Insurance  Commissioner,  and  two  other 
persons  (not  being  members  of  the  Civil  Service),  ap- 
pointed by  the  Governor.  To  provide  capital  the  Treas- 
urer may,  by  authority  of  the  Governor  in  Council,  raise 
from  time  to  time  such  sums  as  he  thinks  fit  not  exceeding 


STATE  FIRE  INSURANCE  171 

£100,000  in  all.  There  is  provision  for  raising  additional 
capital,  not  exceeding  £20,000  at  a  time,  to  carry  on 
business  until  the  pleasure  of  Parliament  is  signified. 
The  rate  of  interest  on  capital  raised  must  not  exceed 
4  per  cent.  The  General  Manager  must,  at  the  expiry  of 
each  triennial  period,  pay  over  to  the  Public  Trustee 
one  half  of  the  net  profits  to  the  credit  of  a  State  Fire 
Insurance  Sinking  Fund  account.  As  soon  as  sufficient 
is  paid  into  this  account  to  meet  the  debentures  at 
maturity,  subsequent  accretions  are  to  be  paid  into  a 
reserve  fund.  Triennially,  one  half  of  the  net  surplus 
profits  goes  to  the  reserve  fund  and  the  other  half  is  to 
be  divided  in  bonuses  amongst  actual  insurers  in  propor- 
tion to  premiums  paid  (The  State  Fire  Insurance  Act, 

1903)- 

On  January  4,  1905,  the  State  Office  began  business 
with  premiums  10  per  cent,  less  than  those  accepted  by 
private  offices.  A  conference  of  under-  Competition  be- 
vvriters  was  immediately  called  and  re-  tween  the  State 
prisals  followed.  The  private  companies  ^^^  the  Private 
reduced  trade  risks  by  10  per  cent.,  as  Companies 
the  State  Office  had  done,  and  reduced  the  rates  on  such 
risks  as  dwelling  houses  and  furniture  by  33  1-3  per  cent. 
The  State  Office,  in  its  turn,  came  into  line  by  making 
the  same  reductions.  (State  Insurance  in  New  Zealand, 
by  W.  P.  Reeves,  North  American  Review,  January, 
1906.) 

At  the  same  time  the  private  offices  resolved  to  boy- 
cott the  State  Office  by  declining  to  take  reinsurance  from 
or  to  give  reinsurance  to  the  State  Office.  They  even 
went  so  far  as  to  refuse  to  accept  any  risk  on  which  the 
State  Office  held  a  line.  In  brief,  they  did  their  best  to 
put  the  State  Office  out  of  business. 

This  attitude  on  the  part  of  the  private  companies  was 


172      STATE  SOCIALISM   IN  NEW  ZEALAND 

designated  by  Mr.  Seddon  as  "  monstrous  and  immoral," 
and  in  September,  1905,  he  despatched  the  General 
Manager  to  England  to  arrange  for  reinsurance.  Arrange- 
ments were  made  with  Lloyd's  for  reinsurance  of  the  State 
risks,  and  by  this  means  the  attempted  boycott  was 
checkmated. 

Early  in  1906  the  private  offices  abandoned  their 
boycott  so  far  as  to  allow  each  other  to  accept  risks 
on  which  the  State  Office  held  a  line,  and  also  to  consent 
to  the  State  Office  taking  a  risk  on  which  they  them- 
selves held  lines,  but  they  still  declined  to  give  or  receive 
reinsurance. 

The   Government,    on    its    part,    as   a   step    toward 

securing  further  business,  had  by  a  circular  issued  in 

June,  1905,  notified  all  borrowers  from 

^^^  ompe-  ^Y^Q  Public  Trust  Office,  the  Advances  to 
Government  Settlers  Office,  and  all  other  State 
lending  Departments,  that  they  must 
place  their  fire  insurance  risks  with  the  State  Office. 
Under  the  ordinary  covenants  in  mortgage  deeds  the 
lender  has  the  right  to  dictate  in  what  office  the  borrower 
shall  insure,  but  in  practice  the  right  is  seldom  exercised. 

The  private  companies  cried  out  against  this  attempt 
to  coerce  insurers,  and  pointed  out  that  if  the  State 
insisted  on  its  right  to  a  monopoly  of  fire  insurance  in  the 
State  lending  Departments,  it  would  easily  reach  the 
next  stage  of  charging  monopoly  premiums. 

The  financial  aspect  of  the  State  Fire  Insurance  Office 
for  the  three  years  for  which  figures  are  available  may  be 
briefly   stated    as    follows:    (State    Fire 
Financial  Con-    insurance    Office,    Annual    Reports    for 
ditionofthe  ,  1.         t^  , 

State  Office         ^^^  ^^^^^   endmg    December   31,    1905, 
1906  and  1907.) 


STATE  FIRE  INSURANCE  173 


?,  S  S  v-wfl  9.  i-cg  "j-g        c.ti 

1905  £13,127    £2,418   18.41     £4,860  44.61     £4.376  £481 

1906  20,962     10,312  49.21       7,776  37.11       2,612     190 

1907  23,195     12,701   55.19      8,989  38.83         744     196 

There  are  three  points  which  will  attract  attention  in 
this  table: 

First, —  The  amount  set  aside  as  a  reserve  for  un- 
earned premiums  stands  at  less  than  33  1-3  per  cent., 
whereas  the  best  English  practice  requires  40  per  cent., 
and  in  the  United  States,  where  losses  by  fire  are  pro- 
portionately greater  than  in  England  but  less  than  in 
New  Zealand,  the  customary  reserve  is  not  less  than  50 
per  cent,  of  the  annual  premiums.  This  represents  what 
is  considered  a  safe  margin  to  cover  the  possible  contin- 
gency of  a  company's  closing  down  and  requiring  to  buy 
cover  for  its  clients  in  another  office  for  the  remainder 
of  their  premium  year.  In  1908  the  reserve  was  raised 
to  40  per  cent. 

Second, —  The  working  expenses  of  a  well-conducted 
fire  insurance  office  should  not  exceed  from  35  to  37  per 
cent,  of  its  premium  income,  whereas  the  State  Office 
has  an  average  expenditure  of  40  per  cent. 

Third, —  By  far  the  most  serious  aspect  of  the  table 
is  the  small  amount  of  underwriting  profit  and  the 
nominal  amount  of  the  reserves.  In- 
deed, if  in  the  years  1906  and  1907  the  Net  Loss  in  1908 
State  Office  has  been  charged  the  annual 
license  of  £200  payable  by  private  offices  its  balance 
sheet  would  have  shown  a  loss.  Finally,  in  the 
year  1908,  the  year's  operations  resulted  in  a  loss  of 
£5,707,  mainly  due  to  bush  fires  and  to  the  Christchurch 


174      STATE  SOCIALISAI   IN  NEW  ZEALAND 

conflagration  {Evefiing  Post,  October  9,  1909.)  In  the 
year  1909  there  was  a  net  profit  of  £2,699.  (Annual 
Report  of  the  State  Fire  Insurance  Office,  1910). 

The  insufficiency  of  the  scale  of  premiums  was  recog- 
nized by  the  General  Manager  early  in  the  history  of  the 
Oflice.      In   his  annual   report  for   1906 
The  Premium      he   said  : 
00   >ow  <i  though  the  prevailing  rates  of  premium  pre- 

sumably are  highly  satisfactory  to  the  insuring 
public,  in  view  of  the  fact  that  they  are  very  much  below  what  they 
were  prior  to  the  advent  of  the  State  Office,  nevertheless  experience 
has  shown  that  they  are  lower  than  they  should  be." 

Again,  in  the  Report  for  1908,  the  General  Manager 
said  : 

"  The  rates  of  premium  during  the  above  years  have  remained 
the  same,  but  the  existing  rates  have  not  proved  sufficiently  high  to 
enable  a  strong  reserve  to  be  built  up  after  the  payment  of  expenses 
of  management,  fire  losses,  etc."     (Year-Bo  ok,  1909,  p.  694.) 

Commenting  on  the  losses  of  1908,  the  Hon.  George 

Fowlds,  Minister  in  charge  of  the  State  Fire  Office, said: 

"  Experience  had  shown  that  the  ruling  rates  were 
What  are  disastrous  from  an  insurance  point  of  view.    Last 

Reasonable  year  the  State  Office  made  a  considerable  loss  on 

'     .  the  business  which  was  done,  and  all  the  com- 

rremiumsr  panics  doing  business  in  New  Zealand  were  badly 

hit,  so  that  it  was  quite  clear  that  the  existing 
rates  could  not  be  maintained  without  heav^  losses  all  round. 
He  did  not  think  it  would  be  justifiable  to  run  the  State  Fire  Insur- 
ance as  a  burden  on  the  general  taxpayers  of  the  Dominion,  and 
the  only  way  to  avoid  that  would  be  to  get  a  reasonable  increase  in 
the  rates  to  meet  the  risk  they  had  to  run.  The  functions  of  the 
State  Office  must  be  to  see  that  the  rates  were  kept  within  reasonable 
bounds."    {Evening  Post,  July  3,  1909.) 

This  was  the  first  frank  admission  of  a  fact  which  had 

been  recognized  for  some  time.  The  General  Manager  had 

always  glossed  it  over  with  a  reference  to  the  enormous 

saving    in    premiums    to    the    insuring  public.      In  the 

Report  for  1907  he  says: 

"  The  insuring  public,  however,  have  reaped  the  benefit  of  the 
reduced  rates,  seeing  same  approximately  amount  to  £450,000  for  the 
past  three  years." 


STATE  FIRE  INSURANCE  175 

On  the  other  hand,  it  was  stated  that  the  insurance 
companies  had  lost  £159,354  ^^  the  year  1908,  and 
£254,956  since  the  State  Office  was  opened  (Evening 
Post,  July  3,  1909),  without  reckoning  the  profits  which 
they  might  have  earned  in  that  time.  Obviously,  it  was 
a  case  of  "  robbing  Peter  to  pay  Paul." 

Had  the  State  Office  been  doing  the  whole  of  the  fire 

insurance  business  of  the  Dominion  its  losses  would  have 

been  at  least  as  great  as  the  combined 

losses  of  the  State  Office  and  the  com-  ^^^  J^""  ^''^^''^ 
,     ,  ,  ,  ,  ,.     vs.  the  Insuring 

pames,  and  the  advantage  to  the  public  pubuc 

would  have  been  nothing.     It  may  be 

that  the  insuring  public  is  almost  co-extensive  with  the 

tax-paying  public,  but  tax-payers  as  such  should  pay 

taxes,  and  insurers  as  such  should  pay  premiums,  and  any 

mixing  up  of  the  obligations  can  only  work  injury  to  all 

concerned.     Insurance  should  not  be  sold  for  less  than 

it  costs  any  more  than  any  other  service  or  commodity. 

As  might  be  expected,  insurance  people  look  upon 

the  activities  of  the  State  Office  with  disgust  and  alarm. 

A  leading  Australian  Insurance  Journal 

says :  Inadequate 

"Operations  are  being  carried  on  at  such  "^^serves 
ruinous  rates  that  the  Department  is  unable  to 
maintain  a  reserve  of  more  than  30  per  cent,  for  the  unexpired  risk, 
a  percentage  v.hich  is  recognized  by  all  underwriters  as  being  far 
below  the  safety  margin.  Should  the  Department  get  caught  in  a 
large  fire,  a  heax^y  loss  will  have  to  be  shown,  there  being  no  reserve 
for  exceptional  losses  at  all.  If  the  New  Zealand  State  Fire  Depart- 
ment is  going  to  pay  its  way  in  the  future,  it  will  have  to  revert  to 
the  rates  obtainable  before  its  advent,  and  when  that  point  is 
reached  the  object  of  having  the  Department  at  all  will  be  obviated." 
{The  Trustees  and  Investors  Review,  Sydney,  August  26,  1907.) 

Referring  to  the  companies'  losses  for  1908,  another 

authority  says: 

"  These  figures  are  lamentable.  The  losses  have  occurred  and 
are  still  occurring,  and  companies  cannot  be  expected  to  provide  a 
surplus  out  of  which  they  shall  all  be  paid.     It  is  a  great  pity,  but 


176     STATE  SOCIALISM  IN  NEW  ZEALAND 

nevertheless  true,  tliat  tlie  fire  waste  in  the  Dominion  is  excessive. 
This  should  not  be  the  case  in  a  young  and  prosperous  country 
like  this,  but  there  is  no  disputing  the  facts."  {Evening  Post,  July  3, 
1909.) 

Notwithstanding  their  losses  in  the  Dominion,  the 
great  New  Zealand  companies  have  continued  to  pay 
dividends  because  of  the  profits  on  their 
The  Companies  oversea  business.  For  example,  the  New 
pay  Dividends  Zealand  Company,  which  paid  an  enor- 
mous sum  to  American  insurers  after 
the  San  Francisco  disaster,  declared  a  dividend  of  5  per 
cent,  upon  its  paid-up  capital  for  the  half-year  ending 
May  31,  1907,  and  showed  a  reserve  of  £390,000  (Sixty- 
ninth  Report,  New  Zealand  Insurance  Company,  Lim- 
ited, February  12,  1908.)  Commenting  upon  this  report, 
the  New  Zealand  Herald  said : 

"  Our  great  local  insurance  corporations, 
The  Companies'  of  which  the  New  Zealand  Company  is  a  type, 
Reserves  have  extended  their  business  far  and  wide,  and 

under  progressive  but  cautious  management  have 
built  up  reserves  which  give  them  a  status  second  to  none  in  the 
confidence  of  the  insuring  public.  .  .  The  accumulation  of  re- 
serves, the  making  of  such  preparations  as  will  enable  hea\^  blows  to 
be  endured  without  loss  of  strength  and  without  undue  pressure  upon 
shareholders,  is  an  essential  feature  of  sound  insurance  management. 
.  .  .  A  State  Fire  Office  ought  surely  to  be  self-supporting,  unless 
the  private  companies  are  to  be  driven  out  of  business  and  fire  insur- 
ance carried  on  upon  philanthropic  lines  as  a  new  form  of  State 
socialism  which  we  may  fairly  term  revolutionary  and  dangerous. 
This  is  certainly  not  intended ;  but  since  to  make  the  State  Fire  Office 
or  any  other  fire  office  self-supporting  on  its  New  Zealand  business, 
rates  must  be  raised  to  somewhat  as  they  were  before  it  was  institu- 
ted, we  may  fairly  ask  what  is  the  good  of  a  State  Fire  Office  at  all?" 
{New  Zealand  Herald,  Auckland,  February  13,  1908.) 

It  is  quite  likely  that  the  rates  which  prevailed 
before    1905   were   not   at    all  exorbitant,   in   view   of 

the  extraordinary  fire  waste  in  New 
Fire  Waste  High  Zealand,    which    is    considerably    larger 

than  that  in  the  United  States,  which, 
in  its  turn,  is  much  greater  than  the  loss  by  fire  in 
European  countries.   In  this  respect  the  State  Life  Office 


STATE  FIRE   INSURANCE  177 

has  a  great  advantage  over  the  State  Fire  Office,  since 
the  death  rate  of  New  Zealand  is  one  of  the  lowest  in  the 
world,  while  the  fire  waste  is  one  of  the  highest.  The 
"  Insurance  and  Banking  Record  "  stated  in  1908  that 
the  insurance  loss  in  the  Dominion  for  the  previous 
five  years  averaged  about  7  shillings  per  head  against 
a  little  over  5  shillings  in  the  United  States.  The 
Inspector  of  Fire  Brigades  estimates  the  total  loss  in 
New  Zealand,  insured  and  uninsured,  at  115:  83^c?.  per 
head,  as  compared  with  105.  per  head  in  the  United 
States.  Such  high  averages  as  these  may  be  due  to  the 
large  proportion  of  wooden  buildings  in  New  Zealand 
and  the  United  States,  to  defective  construction  and 
inadequate  protection  against  the  spread  of  fires. 
(Evening  Post,  November  23,  1909.) 

Again,  it  is  well  known  that  parts  of  New  Zealand 
are  in  the  earthquake  zone,  and  a  repetition  of  the  San 
Francisco  disaster  of  1906  might  occur 
in   Wellington   or   other   cities   at   any     Danger  of 
time.    Dr.  Mackintosh  Bell,  Director  of     Earthquakes 
the  Geological  Survey,  recently  said  in 
a  public  lecture:   "  I  have  no  hesitation  in  saying  that  if 
the  earthquake  of  1855  were  repeated  to-morrow,  very 
few  of  these  fine  buildings,  certainly  none  on  the  made 
ground  along  the  edge  of  the  harbour,  would  be  left 
standing."  (Evening  Post,  August  9,  1909.)     In  view  of 
such  a  contingency,  the  insurance  companies  are  surely 
well  advised  in  accumulating  large  reserves,   and   the 
State  Fire  Office  would  do  well  to  follow  their  example. 

It  must  be  remembered,  however,  that,  except  for 
the  first  reduction  of  10  per  cent.,  the  unprofitable  rates 
that  have   prevailed   since   the  advent 
of  the  State  Office  were  dictated  by  the      ^^  Comnanies 
private  offices,  which   have  only  them- 
selves   to    blame    for    a    large    part    of    their    losses. 


178     STATE  SOCIALISM  IN  NEW  ZEALAND 

The  State  Office  was  obliged  to  meet  the  competitive 
rates  of  the  companies  or  go  out  of  business,  in  which 
case  the  companies  would  have  reimposed  their  old  scale 
of  rates.  The  only  way  to  satisfy  the  public  that  the 
competitive  rates  were  too  low  was  to  go  on  until  a  sub- 
stantial loss  resulted.  This  has  now  occurred,  and  the 
public  will  acquiesce  with  a  better  grace  in  an  increased 
scale  of  premiums. 

Even  if  the  rates  are  raised  to  the  extent  necessary 
to  prevent  a  loss,  it  may  still  be  desirable  to  maintain 
the  State  Office  as  a  safeguard  against 
Premiums  to  imposition.  Its  existence  may  still  be 
be  Increased  warranted  if  it  can  be  shown  that  honest 
business  can  be  done  at  less  than  the 
scale  of  rates  in  force  before  the  State  Office  entered  the 
field.  Certainly,  the  companies  could  do  business  at  any 
rates  profitable  to  the  State  Office,  although  their  profits 
might  be  reduced.  But  if  the  old  rates  were  sound  and 
reasonable,  then  the  whole  scheme  of  State  Fire  Insur- 
ance has  been  a  costly  blunder. 

The  present  writers  do  not  profess  to  be  sufficiently 
versed  in  matters  of  insurance  to  sit  in  judgment  on 
either  the  State  Office  or  the  private  companies.  But  if 
the  old  rates  were  fair,  it  is  clear  that  the  practice  of 
founding  legislation  such  as  this  upon  public  opinion  and 
party  prejudice,  without  the  advice  of  competent  ex- 
perts, should  be  abandoned,  lest  it  should  lead  to  further 
unprofitable  ventures  on  the  part  of  the  State  and  more 
serious  losses  on  the  part  of  private  investors. 

The  one  point  which  may  be  safely  emphasized  in 
connection  with  almost  all  forms  of  governmental  enter- 
prise, is  that  the  State  ought  not  to  sell  services  or  goods 
to  one  portion  of  the  community  at  less  than  cost  price 
and  make  up  the  deficit  by  taxes  upon  the  whole  com- 
munity. 


CHAPTER  XI 
OLD  AGE  PENSIONS 

Among  the  causes  that  led  to  the  passing  of  the  Old 
Age  Pension  law  in  so  young  and  prosperous  a  country 
as    New   Zealand,    emphasis   has   com- 
monly been  laid  on  the  uncertainties  of    Poverty  in 
pioneer   life,    on    the    rapid    alternation    New  Zealand 
between   prosperity   and    depression   in 
countries  chiefly  engaged  in  growing  raw  materials  for 
Europe,  and  on  the  alleged  desire  of  a  socialistic  democ- 
racy to  equalize  wealth  and  to  relieve  the  individual  of 
the  responsibility  of  taking  care  of  himself  by  transferring 
the  burden  to  the  State.     But  to  some  extent,  at  least, 
the  poverty  which  the  pension  law  presupposes  appears  to 
have  been  caused  by  the  defective  system  of  charitable 
aid,  which  has  often  been  a  source  of  poverty  instead  of 
a  cure  for  it. 

The  first  statutory  recognition  of  the  right  of  the  in- 
digent to  claim  relief  from  the  community  was  contained 
in  "  The  Hospital  and  Charitable  Insti- 
tutions Act,  1885,"  although  practically         r  i-  f 
the  right  had  been  yielded  a  long  time  be- 
fore that  by  the  provincial  governments  in  the  first  in- 
stance, and,  later,  by  the  general  Government.   (Parlia- 
mentary Debates,  vol.  53,  p.  461.) 

Under   the  Act  of    1885,   re-enacted    in    1908,    the 
Dominion  is  divided  into  thirty-five  hospital  districts, 
each  presided  over  by  an  elective  board 
designated   the   "  Hospital  and   Charit-     Charitable  Aid 
able   Aid    Board."     All    the   charitable 

179 


i8o     STATE  SOCIALISM  IN  NEW  ZEALAND 

institutions  in  the  District  are  vested  in  this  Board, 
except  those  incorporated  as  "separate  institutions," 
which  have  their  own  powers  of  internal  management 
and  look  to  the  Board  merely  for  their  funds.  It  is  the 
duty  of  the  Board  to  raise  sufficient  money  to  take  charge 
of  the  institutions  remaining  unincorporated,  and  to  sup- 
plement the  funds  of  the  incorporated  institutions.  The 
revenues  of  the  Boards  are  derived  from  endowment 
vested  in  the  Boards,  or  set  apart  for  the  benefit  of  par- 
ticular institutions,  from  voluntary  contributions,  grants 
from  local  authorities,  and  subsidies  from  the  general 
Government.  On  the  demand  of  the  Board  in  any  dis- 
trict, the  various  local  bodies  in  the  district  levy  special 
rates  as  their  contributions  to  the  Hospital  and  Charit- 
able Aid  Fund.  The  general  Government  grants  sub- 
sidies of  lo^.  for  every  £i  of  bequests,  £i  -.^.s.  for  every 
£i  of  voluntary  contributions,  and  £i  for  every  £i  re- 
ceived   from   any   local   authority.     (Year-Book,    1909, 

P-  293-) 

As  a  result  of  this  somewhat  intricate  enactment  the 
management  of  poor  relief  has  been  wholly  localized,  but 
the  expense  has  been  only  partially 
j^  localized.    It  was  hoped  that  by  making 

the  governmental  subsidy  vary  with  the 
amount  of  local  contributions,  the  springs  of  private 
charity  would  not  be  dried  up,  or,  if  they  were,  that  the 
local  rates  would  take  their  place.  But  these  hopes  were 
not  realized,  and  in  the  end  the  greater  part  of  the  burden 
of  poor  relief  was  thrown  upon  the  State,  while  the 
responsibility  for  adnjinistering  it  remained  with  the 
local  authorities. 

Three  years  after  the  passing  of  the  Act,  Dr.  Duncan 
MacGregor,  the  Inspector  of  Hospitals  and  Charitable 
institutions,  reported  as  follows: — 


OLD  AGE  PENSIONS  i8i 

"  The  chief  difficulty  to  be  got  over  in  the   working    of    all    our 
charitable    institutions    is    the   impossibility   of 
getting  the  taxpayers  of  the  large  towns  where     Evils  of 
the  most  lavish  charity  is  dispensed  to  take  the     indiscriminate 
least   trouble   or    even    to    try    to    hmder    the 
wholesale    pauperization  that  is  going  on.     So     Charity 
long  as  the  State  gives  money  out  of  the  Con- 
solidated Fund  and  allows  the  towns  to  tax  the  country,  what  hope  is 
there  that  this  problem  will  be  seriously  faced?     One  of  the  chief 
aims  of  the  existing  Act  was  to  leave  nothing  undone  to  encourage 
the  voluntary  contributions  for  charitable  purposes  that  so  honour- 
ably distinguished  some  districts,  but  unfortunately  here,  as  else- 
where, a  poor  law  dries  up  the  springs  of  private  charity."    (Appen- 
dix to  the  Journals,  1889,  H.  3.) 

Dealing  in  1894  with  a  special  effort  made  by  pri- 
vate subscriptions  to  cope  with  a  formidable  increase  in 
unemployment,  Dr.  MacGregor  says: 

"  This  is  a  new  departure  of  the  most  hopeful  augury  that  a  time 
is  coming  very  soon  when  no  money  will  be  raised  by  the  Central 
Government  to  be  expended  in  outdoor  relief  by  local  bodies,  and 
when  all  outdoor  relief  is  paid  for  out  of  direct  local  taxation.  It  is, 
in  my  opinion,  the  only  plan  by  which  this  young  country  can 
escape  disaster  due  to  investing  a  large  part  of  the  consolidated 
revenue  in  the  permanent  degradation  of  the  people." 

Again,  in  1895,  he  writes: 

"  Having  its  roots  mainly  in  the  undesirable  immigrants  who 
were  sent  here  during  the  ascendant  years  of  our  great  public  works 
policy,  we  have  here  and  jiow  among  us  a  growing  mass  of  persons 
who  are  not  helpable  in  any  effective  way  and  our  method  of  dealing 
with  them  is  simply  destructive  of  the  Commonwealth."  (Report, 
1895,  H.  22,  Appendices.) 

In  1897,  Dr.  MacGregor  reiterates  his  previous  state- 
ments and  cites  with  approval  the  presidential  address  at 
the  American  Congress  of  Charities  and 
Corrections,  in  which  the  problem  of  out-    Drastic  Reform 
door  relief  is  attacked  in  one  respect  by    Proposed 
proposing  to  "  cut  ofif  the  entail  of  hered- 
tary  pauperism  and  crime  and  insanity  and  idiocy  in  a 
very  large  degree  by  keeping  defectives  in  institutions 
which  resemble  heaven  in  at  least  one  particular,  because 
there  is  neither  marrying  nor  giving  in  marriage  in  them." 
On  this  Dr.  MacGregor  says: 


182     STATE  SOCIALISM  IN  NEW  ZEALAND 

"  Outdoor  relief  is  as  catching  as  smallpox  and  just  as  deadly. 
In  1890  a  bill  on  exactly  these  lines  was  introduced  into  our  Parlia- 
nuMit.  Two  years  ago  it  was  recast  leaving  out  the  cardinal  principle 
of  imprisonment  for  all  able-bodied  loafers  who  would  not  work. 
The  reason  for  leaving  out  this  keystone  of  the  arch  was  that  public 
opinion  was  not  ripe  for  such  a  drastic  step." 

In  the  same  year  the  Assistant  Inspector,  Mrs.  Neill, 
says: 

"  I  am  more  than  ever  convinced  that  the  existing  system  of  out- 
door relief  encourages  a  cancerous  growth  of  pauperism  and  many 
another  social  evil.  Is  the  Charitable  Aid  Board  deputed  by  the 
State  and  ratepayers  to  relieve  destitution  or  to  alleviate  poverty? 
If  the  former  we  may  hope  to  minimize  pauperism  and  help  upward 
honest  struggling  distress;  if  the  latter  we  may  as  well  try  to  fill  a 
sieve  with  water." 

That  the  authorities  quoted  were  not  alone  in  their 

opinions,  although  their  persistent  efforts  toward  reform 

of  the  system  of  charitable  aid  have  been 

pinions  o       r.  ignored,  can  easily  be  shown.    Mr.  Sed- 
Seddon  and  Dr.     ,        ,  .         ...     .  ,      .       ,  .     ^,  ,    , 

Valentine  himselt,  m  mtroducmg  his  Uld  Age 

Pensions  Bill  in  1896,  said: 

"  Is  there  a  member  of  the  House  who  will  tell  us  that  our 
present  laws  dealing  with  charitable  aid  are  working  satisfactorily? 
I  say  that  class  of  legislation  has  been  the  bane  of  our  Colony.  We 
are  producing,  as  it  were,  a  class  of  paupers,  and  yet  who  do  not  feel 
that  in  receiving  aid  under  legislation  they  are  degenerating  and 
holding  an  inferior  position.  And  yet  that  system  is  costing  this 
Colony  no  less  than  £90,000  a  year."  (Parliamentary  Debates, 
vol.  95,  p.  625.) 

Dr.  T.  H.  A.  Valentine,  the  present  Inspector-General 
of  Hospitals,  says  in  his  report  for  1908: 

"  I  may  yet  be  able  to  convince  the  people  of  the  Dominion 
that  an  indiscriminate  doling  out  of  charitable  aid  must,  in  the  long 
run,  have  a  bad  effect  on  the  country  at  large.  It  is  the  duty  of  those 
responsible  to  call  attention  to  this,  and  to  try  to  convince  the  con- 
trolling authorities  that  no  recipient  of  charitable  aid  should  be 
better  placed  as  regards  the  necessaries  and  comforts  of  life  than 
the  struggling  working  man.  Authorities  on  the  subject  agree  that 
the  only  way  to  prevent  abuse  in  the  administration  of  out-door 
relief  is  to  throw  the  whole  cost  on  the  local  rates,  and  with  that  end 
in  view  the  Government  subsidy  for  out-door  relief  should  be  with- 
drawn." 


OLD  AGE   PENSIONS  183 

These  statements  are  very  instructive,  not  only  as 
pointing  to  an  important  agency  in  fostering  poverty, 
but  as  calling  attention  to  the  extreme  difficulty  of  the 
problem  of  poor  relief,  and  as  showing  that  the  poor  law 
system  should  have  been  reformed,  if  it  could  have  been 
reformed,  before  the  Government  proceeded  to  build  up 
a  system  of  old  age  pensions.  (Parliamentary  Debates, 
vol.  100,  p.  325.) 

The    Pension    Law   was    passed    in    1898    and    was 
amended  in  1900,  1901,  1902,  1905,  1908  and  1909,  and 
the  following  is  a  brief  sketch  of  the  law 
as  it  now  stands.  The  Old  Age 

The  qualifications  required  of  an  ap-        Pensions  Act 
plicant  for  a  pension  may  be  divided 
into  three  groups. 

1.  Qualifications  as  to  age  and  length  of  residence. 
The  applicant  must  be  65  years  of  age,  and  must  have 
resided  continuously  in  New  Zealand  for  the  twenty-five 
years  preceding  his  application.  But  four  years'  absence 
is  allowed  provided  that  twelve  months'  residence  oc- 
curred immediately  before  the  appllication  and  a  total 
residence  of  twenty-five  years  is  established. 

2 .  Qualifications  designed  to  exclude  the  undeserving. 
The  applicant  is  disqualified  from  receiving  a  pension  if 
he  has  been  imprisoned  during  the  preceding  twelve 
years  for  four  months  or  on  four  occasions  for  an  offence 
punishable  by  twelve  months'  imprisonment;  or  if  dur- 
ing the  twenty-five  years  preceding  his  application  he 
has  been  imprisoned  for  five  years;  or  if  during  the 
preceding  twelve  years  he  has  deserted  his  wife  and 
children;  or  if  he  has  not  during  the  twelve  months  pre- 
ceding his  application  lived  a  sober  and  reputable  life. 

3.  Qualification  as  to  poverty. 

The  applicant's  yearly  income  must  not  amount  to 


i84     STATE  SOCIALISM  IN  NEW  ZEALAND 

over  £60  ($300),  and  his  accumulated  property  must  not 
be  £260  ($1 ,300)  or  over. 

The  conditions  imposed  to  exclude  the  undeserving 
represent  an  attempt  to  impose  a  moral  standard  which 

must  always  be  unsatisfactory  but  which 
External  Stand-  it  is  difficult  to  replace  by  anything  bet- 
ard  of  Desert        ter.    If  the  principle  of  granting  pensions 

is  once  admitted,  an  arbitrary  external 
standard  of  conduct  is  the  only  practicable  test  that  can 
be  imposed.    The  preamble  of  the  Act  reads  as  follows: 

"  Whereas  it  is  equitable  that  deserving  colonists  who  during  the 
prime  of  life  have  helped  to  bear  the  public  burdens  of  the  Colony 
by  the  payment  of  taxes,  and  to  open  up  its  resources  by  their  labour 
and  skill,  should  receive  from  the  Colony  a  pension  in  their  old  age." 
(The  Old-age  Pensions  Act,  1898.) 

Commenting  on  the  discrepancy  between  the  pre- 
amble and  the  Act,  Mr.  A.  R.  Atkinson  said: 

"  The  preamble  notwithstanding,  there  is  no  guarantee  that  a 
pensioner  shall  have  done  any  work  for  the  Colony  or  contributed 
one  iota  of  honest  labour  and  skill  towards  opening  up  its  resources 
or  helped  in  any  way  whatever  to  bear  the  burden  of  taxation,  nor, 
on  the  contrary,  is  there  any  guarantee  that  he  shall  not  have  ob- 
structed or  neutralised  the  labour  and  skill  of  others  and  made  him- 
self a  burden  to  the  taxpayer  and  a  pest  to  society  all  his  life.  Crime 
during  the  prime  of  life  does  not  disqualify;  poverty  and  idleness 
at  65  are  necessary  to  qualify;  and  practically  the  only  thing  to  dis- 
qualify is  the  industry  and  care  which  at  that  age  have  accumulated 
the  sum  of  £540  or  are  still  competent  to  earn  more  than  £34  a  year. 
It  is  no  exaggeration  to  say  that  demerit  and  not  merit  is  what  the 
Bill  fosters  and  favours." 

The  only  answer  that  can  be  made  to  this  criticism 
is  that  unless  we  content  ourselves  with  some  such  rough 
and  ready  tests,  we  must  either  allow  the  merits  of  each 
applicant  to  be  gauged  by  the  "  length  of  the  chancellor's 
foot,"  or  abandon  all  attempts  to  exclude  the  unworthy 
and  make  the  pension  universal. 

Much  greater  difficulties  present  themselves  in  con- 
sidering the  exclusion  of  those  whose  income  or  property 


OLD  AGE  PENSIONS  185 

exceed  the  minimum  mentioned  in  the  Act.     The  full 

pension  of  £26  a  year  is  reducible  by  £1 

r  r       c  '  p  T-i  Standard  of 

tor  every  £1  01  mcomeover  £34.    Thus,  ^^     . 

when  the  applicant's  income  reaches  £60 
the  right  to  a  pension  is  lost.  Income  is  money  or  profits 
derived  from  any  source,  and  includes  the  cost  of  board 
and  lodgings  up  to  £26,  but  not  sick  allowance  or  funeral 
benefits  paid  by  a  friendly  society.  In  the  original  Bill 
of  1896,  personal  earnings  were  excluded  from  the  defin- 
ition of  income,  but  it  was  pointed  out  that  under  such 
circumstances  a  Supreme  Court  Judge  with  an  income  of 
£1,500  a  year,  provided  he  had  no  property,  could  apply 
for  a  pension.  Accordingly,  in  the  Act,  personal  earnings 
were  included  in  income. 

As  to  property,  a  deduction  of  £1  is  made  from  the 
pension  for  every  £10  of  accumulated  property.  Thus, 
when  the  property  reaches  £260  the  right  to  a  pension 
ceases.  The  reason  given  for  this  limit  is  that  for  the 
sum  of  £260  a  person  aged  65  can  buy  an  annuity  to 
keep  him  for  the  rest  of  his  life. 

It  is  frequently  argued  that  a  man's  home,  whatever 
its  value,  so  long  as  it  was  not  used  to  produce  an  income, 
should  be  exempted  in  estimating  accu-  proposed 
mulated  property.    Accordingly,  a  strong  Exemption  of 
effort  has  been  made  on  several  occasions  the   Applicant's 
to  have  this  exemption  made.    The  pro-  "ome 
posal  was  at  first  resisted  by  Mr.  Seddon,  but  in  1905  he 
yielded  so  far  as  to  allow  a  deduction  of  £150  when  any 
part  of  the  property  of  an  applicant  consisted  of  property 
on  which  he  permanently  resided,  if  such  property  pro- 
duced no  income.     Further  than  this  he  refused  to  go, 
saying,  "  if  you  do  away  entirely  with   the  property 
disqualification  you  might  just  as  well  have  the  universal 
pension."     (Parliamentary  Debates,  vol.  132,  p.  365.) 


1 86     STATE  SOCIALISM  IN  NEW  ZEALAND 

On  October  21,  1909,  a  large  deputation  of  members 
of  Parliament  waited  on  the  Premier  and  urged  that  the 
applicant's  home,  of  whatever  value,  should  be  exempted . 
Mr.  T.  E.  Taylor,  who  took  a  keen  interest  in  moulding 
the  original  Bill,  said: 

"  Whatever  the  value  of  the  home  was,  so  long  as  it  was  only 
the  result  of  their  taste  and  their  thrift,  it  should  not  be  a  disad- 
vantage to  them.  At  present  the  better  class  of  Colonists  had  to  see 
less  thrifty  pensioners  getting  the  full  amount,  while  they,  because 
they  had  improved  their  homes,  were  not  eligible  to  receive  the 
full  amount."     {Evening  Post,  October  21,  1909.) 

The  Premier,  while  expressing  sympathy  with  the 
proposal,  stated  that  if  a  limit  of  only  £650  on  a  home 
were  conceded,  the  annual  cost  of  the  pensions  would  be 
increased  by  £50,000,  which  was  more  than  the  Govern- 
ment could  afford  at  that  time. 

The  proposal  to  exempt  homes  serves  to  illustrate 
the  impossibility  of  arriving  at  any  logical  or  consistent 
basis  for  pensions  short  of  a  universal  pension.  The 
owner  of  a  home  worth  £650  is  not  necessarily  more 
thrifty  than  a  man  who  has  the  same  value  invested  in 
some  other  way,  and,  if  homes  were  exempted,  the  own- 
ers of  other  property  would  presently  claim  an  equal  ex- 
emption. It  is  impossible  to  arrive  at  a  system  designed 
to  help  the  poor  which  will  at  the  same  time  reward 
others  for  not  being  poor.  The  law  cannot  recognize 
both  thrift  and  unthrift  at  the  same  time,  unless  pensions 
are  granted  to  rich  and  poor  alike. 

A  point  that  was  brought  out  by  Sir  Joseph  Ward, 
in  reply  to  the  deputation,  was  that  a  good  many  pen- 
sioners had  well-to-do  relatives,  on  whom 

Some  Pension-    the  burden  of  their  support  ought  to  fall, 
ers   have   Well- 

to-do  Relatives    ^°  doubt  there  is  a  large  number  of  aged 
persons  who  are  willing  to  accept  a  pen- 
sion, but  who  would  refuse  to  receive  charitable  aid,  as 


OLD  AGE  PENSIONS  187 

they  are  not  ordinary  paupers  and  their  relatives  would 
support  them  if  they  had  to  do  so.  The  Evening  Post 
says: 

"  A  State  which  reHeves  them  of  the  liability  by  undertaking 
the  work  itself  not  only  adds  quite  unnecessarily  to  its  own  burden, 
but  at  the  same  time  encourages  a  far  meaner  vice  than  unthrift." 
(Evening  Post,  Wellington,  October  22,  1909.) 

A  curious  feature  of  the  law  is  the  total  exclusion  of 
persons  of  certain  races  from  the  right  to  a  pension, 
although  they  otherwise  comply  with 
all  the  requirements.  It  is  natural,  of  Asiatics 
course,  that  aliens  should  be  excluded,  Excluded 
but  Chinese  and  other  Asiatics  are  dis- 
qualified, even  though  they  may  have  been  naturalized. 
Their  exclusion  seems  a  matter  of  course  to  the  people  of 
New  Zealand  and  Australia,  who  are  possessed  of  an 
unconquerable  antipathy  to  all  Asiatics.  But  if  the 
racial  prejudice  is  excusable,  it  should  be  carried  to  its 
logical  conclusion,  and  Asiatics  should  not  be  allowed 
to  become  naturalized.  Under  both  English  and  New 
Zealand  law  it  is  declared  that  a  naturalized  subject 
"  shall  be  entitled  to  all  political  and  other  rights,  powers 
and  privileges,  and  be  subject  to  all  obligations  to  which 
a  natural  born  British  subject  is  entitled  and  subject." 
Therefore,  while  an  Asiatic  is  permitted  to  take  out  let- 
ters of  naturalization  he  is  denied  the  rights  which  such 
letters  expressly  confer.  If  such  a  case  occurred  in  the 
United  States,  the  law  would  doubtless  be  held  to  be 
unconstitutional. 

The  New  Zealand  system  of  Old  Age  Pensions  has 
been  extravagantly  praised  as  the  acme  of  humanitarian 
legislation,  and  unsparingly  condemned  as  a  demoral- 
izing form  of  charitable  aid. 

But  neither  of  these  extreme  views  can  be  regarded 


i88      STATE  SOCIALISM  IN  NEW  ZEALAND 

as  correct.     It  is  erroneous  to  describe  the  system  as  a 

Pensions  not  a    "^ere  extension  of  outdoor   poor  relief. 

Mere  Extension    In  so  far  as  the  granting  of  the  annuity 

of  Charitable       is    made    dependent    on    quahfications 

designed  to  Hmit  it  to  deserving  persons, 

the  payment  may  properly  be  called  a  pension  rather 

than  a  form  of  charitable  aid. 

"  This  pension  recognizes  that  the  man  who  has  kept  his  head 
above  water  till  he  is  65  years  of  age,  who  is  a  man  of  good  character, 
who  has  not  been  a  drunkard  nor  a  criminal,  should  be  supported  as 
of  right  in  his  old  age,  and  should  not  have  to  come  before  a  body  of 
citizens  sitting  as  a  Charitable  Aid  Board  to  pass  judgment  on  him 
as  to  whether  he  is  a  deserving  person  or  not."  (Parliamentary 
Debates,  vol.  100,  p.  62.) 

On  the  other  hand,  in  so  far  as  the  payment  is  made 

by  reason  of  the  applicant's  need,  and  not  as  a  return  for 

premiums  paid  or  services  rendered,  it  is  truly  described 

as  a  form  of  charitable  aid.    The  recent  British  Act  makes 

a  bolder  attempt  to  exclude  the  undeserving,  since  an 

applicant  is  disqualified 

"  if  he  has  habitually  failed  to  w^ork  according  to  his  ability,  oppor- 
tunity and  need,  for  the  maintenance  of  himself  and  those  dependent 
upon  him."  (Report  of  the  Massachusetts  Commission  on  Old  Age 
Pensions,  Boston,  1910,  p.  94.) 

One  of  the  criticisms  usually  offered,  in  respect  to  all 

legislation  of  the  kind  under  consideration,  is  that  a 

legislature  elected  under  universal  suf- 
Concessions  ^  ^^.jjj    ^^    ^^^^^j^   ^^   ^.^^j^^   ^^^  ^^_ 

made  from  Time  ,        ,  ...    ,  •        ,,  , 

to  Time  mands    that  will    be  contmually  made 

for     further    concessions    and     greater 

expenditure.     The  amendments  made  in  the  Old  Age 

Pensions  Act  since  1898  seem  to  offer  some  support  to 

this  criticism.     The  following  are  some  of  the  changes 

that  have  been  made  since  1898: 

I .  Original  amount  of  pension,  £18.  Increased  in  1905 

to  £26. 


OLD  AGE  PENSIONS  189 

2.  Income  allowed  in  1898  without  disqualification, 
£52.      Increased  in  1900  to  £60. 

3.  Amount  of  joint  income  (with  pension  added)  re- 
quired to  disqualify  a  married  couple,  £78,  Increased 
in  1900  to  £90. 

4.  The  property  and  income  of  husband  and  wife 
was  at  first  assessed  separately.  Since  1900  their  pro- 
perty and  income  is  estimated  jointly  and  equally  divided. 

5.  In  1905  the  deduction  allowed  from  property  on 
account  of  a  home  w^as  increased  from  £50  to  £150. 

6.  By  the  Act  of  1898  all  investigations  of  claims 
were  to  be  made  in  public.  By  the  Act  of  1905  these 
investigations  may  now  be  heard  in  private. 

7.  By  the  Act  of  1898  two  years'  absence  was  allowed 
in  twenty-five  years.  By  the  Amending  Act  of  1900 
four  years  absence  was  allowed,  provided  total  residence 
reached  twenty-five  years. 

8.  By  the  Act  of  1898  the  applicant  must  not  have 
deserted  his  wife  and  children  at  any  time.  By  an 
amendment  in  1902  the  words  "  at  any  time  "  were  struck 
out  and  "  during  the  past  twelve  years  "  substituted. 

9.  By  the  Act  of  1898  the  applicant  must  for  the  pre- 
ceding five  years  have  led  a  sober  and  reputable  life. 
In  1908  this  period  was  reduced  to  one  year.  This 
alteration  was  made  to  allow  pensioners  thrice  con- 
victed of  drunkenness  to  apply  again  for  their  pen- 
sion at  the  end  of  twelve  months.  As  the  law  now 
stands,  a  Magistrate  may  suspend  the  pension  for  a 
period  not  exceeding  six  months  as  a  punishment  for  the 
first  conviction  for  drunkenness;  for  the  second  con- 
viction he  must  suspend  it  for  a  period  exceeding  six 
months  but  not  exceeding  twelve  months;  if  satisfied 
that  the  pensioner  is  a  habitual  drunkard,  the  Magistrate 
must  cancel  the  pension. 


190     STATE  SOCIALISM  IN  NEW  ZEALAND 

10.  By  the  Act  of  1908  anyone  owning  sufficient 
property  to  disqualify  him  under  the  Act  of  1908  was 
allowed  to  remove  the  disqualification  by  purchasing  an 
annuity  of  about  £34,  which  would  still  allow  him  to 
draw  the  full  pension  of  £26. 

11.  In  1908  the  Magistrate  was  authorized  to  regard 
an  applicant's  income  as  "  the  amount  he  would  probably 
earn  during  the  ensuing  twelve  months  "  instead  of  the 
amount  of  his  income  for  the  preceding  twelve  months. 

In  reference  to  the  amendment  which  allows  pension 
claims  to  be  heard  in  private,  it  is  interesting  to  note 

that  the  Registrar  includes  this,  with 
Claims  now  the  five  amendments  first  quoted,  as 
heard  in  Private  one  of   the   causes   which  have   helped 

to  bring  about  an  enlarged  annual  ex- 
penditure. (Registrar's  Annual  Report,  1906.)  Writ- 
ing on  this  point  in  1902,  before  the  amendment  had 
been  made,  Mr.  Reeves  said: 

"  Seeing  that  15,000  claims  have  been  granted,  either  in  whole 
or  in  part,  it  does  not  look  as  though  many  persons  with  a  fair  claim 
have  been  afraid  to  make  it.  And  the  outcr\',  against  secrecy,  had 
any  been  attempted,  would  assuredly  have  been  great  and  just." 
(State  Experiments,  vol.  2,  p.  256.) 

While  the  Bill  of  1898  was  under  debate,  some  mem- 
bers advocated   a   contributory  scheme   involving   the 

principle  of  compulsion,  as  in  the  Ger- 
Contributory  man  plan.  They  put  forward  figures 
Plan  Rejected      to  show  that    a   weekly  payment  of  6 

pence  during  his  working  life  would 
secure  to  a  workingman  a  competence  at  the  age 
of  65.  Various  other  compulsory  schemes  were  sug- 
gested based  on  the  pri.iciple  of  governmental 
aid  supplementing  individual  contributions.  So  far 
back  as  1884  Sir  Harry  Atkinson  had  unsuccessfully 
advocated  a  contributory  scheme.     Mr.  Seddon   held 


OLD  AGE  PENSIONS  191 

that  such  a  scheme  was  impracticable  and  effectively 
stated  the  chief  objections  to  it.  A  system  which 
might  work  well  in  a  country  like  Germany  where 
there  was  relative  permanency  of  employment,  would  be 
likely  to  fail  in  a  young  country  like  New  Zealand,  where 
employment  was  relatively  intermittent  and  it  would 
be  inconvenient  or  impossible  for  employers  and  workers 
to  make  the  necessary  weekly  contributions.  And  cer- 
tainly, it  would  be  impossible  to  employ  an  army  of  col- 
lectors under  military  control.  Mr.  J.  Hutcheson  put  the 
argument  in  a  nutshell  when  he  said: 

"  I  say  to  those  who  propose  compulsory  state  insurance  that 
before  they  can  carry  it  out  they  must  first  be  prepared  to  find  for 
every  one  permanent  employment  at  a  living  wage  and  something 
over,  and  then  garnish  their  wages  for  the  amount  of  the  pension 
premium."     (Parliamentary  Debates,  vol.  lOO,  p.  72.) 

The  argument  of  Mr.  Lloyd  George  against  estab- 
lishing a  contributory  pension  in  Great  Britain  gives  a 
new  view  of  this  question.     He  said: 

"  As  long  as  you  have  taxes  upon  commodities  which  are  con- 
sumed practically  by  every  family  in  the  country',  there  is  no  such 
thing  as  a  non-contributor>'  scheme.  If  you  tax  tea  and  coffee  and 
partly  sugar,  beer  and  tobacco,  you  hit  everybody  one  way  or  an- 
other." (Report  of  the  Massachusetts  Commission  on  Old  Age 
Pensions,  Boston,  1910,  p.  94.) 

The  only  other  system  which  has  been  seriously  dis- 
cussed is  that  of  a  universal  pension,  and  this  has  been 
favoured  by  a  large  number  of  people 
as  the  only  logical  way  of  escape  from  A  Universal  Pen- 
,       .  .  .  r     -i  •     •  sion  too  Expen- 

tne  mconsistencies  01  the  existmg  sys-  ^j^^ 

tem.    In  1905,  the  Leader  of  the  Opposi- 
tion wished  to  move  an  amendment  in  favour  of  a  univer- 
sal pension,  but  was  prevented  by  the  Standing  Orders 
of  the  House, 

In  opposition  to  this  proposal  Mr.  Seddon  quoted  the 


192      STATE  SOCIALISM  IN  NEW  ZPIALAND 

following  figures  to  show  the  annual  cost  of  a  pension 

^         ,„       .         to  all  those  who  were  qualified  by  age 
Cost  of  Pensions        ,    ,         ,        ^  .  ,  .  , 

and    length   ot    residence  without    any 

other  restriction: 


Year  ending 

Estimated  number 

-  Total  cost  at  £26 

qualified  by  age  and 

per  annum 

residence 

March  31,  1906 

35.332 

£918,632 

March  31,  1907 

36.747 

955.422 

March  31,  1908 

38,524 

1,001,624 

March  31,  1909 

40,075 

1,041,950 

March  31,  1910 

42,178 

1 ,096,628 

Commenting  on  the  figures  he  said: 

"  Are  you  prepared  to  add  another  half  million  by  way  of 
taxation  for  the  sole  purpose  of  paying  a  universal  pension?  My 
own  view  is  that  the  moment  you  attempt  to  lev^y  additional  taxa- 
tion for  the  old  age  pension  that  moment  you  break  down  the  entire 
pensions  scheme  and  it  is  simply  the  beginning  of  the  ^nd."  (Par- 
liamentary Debates,  vol.  132,  p.  365.,  vol.  145.,  p.  762.) 

The  financial  difficulty  seems  to  be  the  only  one 
that  has  restrained  Parliament  from  granting  universal 
pensions,  although  it  would  surely  be  absurd  and  unjust 
to  levy  taxes  on  the  whole  community  for  the  purpose 
of  paying  pensions  to  people  who  do  not  need  them. 

The  following  table  shows  the  number  of  pensioners 
for  every  year  since  1900,  together  with  the  total  amount 
paid  and  the  cost  per  head  of  the  population: 

Year  ending  Pensioners  Amount  Cost  per  head  of 

March  31  population 

1900  11,285  £157.342  4^-  I^-        ($0.98) 

1901  12,405  197.292  5  I 

1902  12,776  207,468  5  3 

1903  12,481  210,140  5  2 

1904  11,926  203,164  4  10 

1905  11.770  195.475  4  6 

1906  12,582  254,367  5  8 

1907  13.257  314.184  6  10 

1908  13.569  325.199  6  II 

1909  14.396  336,760  6  II        ($1.66) 

The  sum  of  £336,760,  compared  with  a  total  revenue 


OLD  AGE  PENSIONS  193 

of  over  £9,000,000,  seems  trifling,  but  it  should  be  remem- 
bered that  in  the  latter  amount  are  included  the  receipts 
from  railways  and  other  investments  which  are  not 
available  for  purposes  of  general  expenditure.  The  ex- 
penditure on  pensions  should  be  compared  with  the  total 
revenue  from  taxation,  which  was  £4,377,761  in  the 
year  1909.  The  Old  Age  Pensions,  then,  absorb  about  8 
per  cent,  of  the  revenue  from  taxation.  This  does  not 
seem  to  be  a  heavy  burden  for  a  prosperous  country  like 
New  Zealand,  and  the  people  of  the  Dominion  regard  it 
with   equanimity. 

It  was  expected  that  the  establishment  of  Old 
Age  Pensions  would  reduce  the  amount  spent  on  chari- 
table aid,  but  such   has   not  been  the 

case.       The    Hon.     Dr.     Findlay    said  1^^^"}^'!^^^ ,  !T 

,      .       ,       ^^  ^^  ^  Charitable  Aid 

recently  m  the  Upper  House:  Increases 

"  The  increase  in  our  population  from  1894 
to  1908  was  from  683,111  to  945,063,  and  the  increase  in  hospital 
and  charitable-aid  expenditure  for  the  same  period  was  from  £177,- 
724  to  £349,621.  In  other  words,  the  increase  in  hospital  and 
charitable-aid  is  advancing  much  more  rapidly  than  our  increase 
of  population,  so  that  per  capita  the  burden  is  steadily  increasing 
and  will  go  on  increasing.  That  impresses  upon  us  that  we  have  got 
to  exercise,  as  soon  as  possible  and  as  firmly  as  possible,  every  degree 
of  economy,  care  and  prudence  on  the  administration  of  this  large 
fund."     (Parliamentary  Debates,  vol.   148,  p.  486,  Dec.   i,   1909.) 

No  doubt,  as  Mr.  Anstey  said  in  the  same  debate,  the 
work  of  charitable-aid  is  carried  on  with  far  greater 
efficiency  than  formerly,  so  that  the  comparison  with 
former  years  is  not  quite  fair,  and  yet  it  is  diasppointing 
to  find  that  so  large  an  expenditure  on  pensions  should 
have  no  efi"ect  in  reducing  the  burden  of  charitable  aid. 
It  should  be  noted  that  the  amount  spent  per  capita  in 
outdoor  relief  has  slightly  diminished,  so  that  the  increase 
in  total  expenditure  must  have  been  due  to  improve- 
ments in  the  hospitals.  (Report  of  the  Massachusetts 
Commission  on  Old  Age  Pensions,  Boston,  1910,  p.  106.) 


194      STATE  SOCIALISM  IN  NEW  ZEALAND 

One  result  of  the  establishment  of  pensions  and  of 
the  increasing  expenditure  on  poor  relief  out  of  the  public 
funds,   has   been   a   marked   decline  in 
o  un  ary      on-  j-gj^j^j^g  proportion  of  funds  derived  from 
tnbutions  fall  ,  ...  .  ,  , 

Qjf  voluntary   contributions,    notwithstand- 

ing the  great  increase  in  private  wealth. 
People  who  are  compelled  to  pay  taxes  for  charitable  pur- 
poses seem  disinclined  to  make  voluntary  contributions 
as  w^ell.     Dr.  Findlay  says: 

"  It  is,  perhaps,  not  a  very  satisfactory  state  of  things,  but  it  is 
true,  that  the  contributions  to  this  class  of  poor  relief  from  voluntary 
sources  have  steadily  declined  in  New  Zealand  in  proportion  to  the 
total  amount  required.  It  was  at  one  time  one  ninth  of  the  whole 
amount;  now  it  is,  I  believe,  less  than  one  twelfth.  .  .  The 
present  Chief  Justice  had  an  opportunity,  when  dealing  with  the  sub- 
ject matter  in  the  Senate  the  year  before  last,  to  point  to  the  fact 
that  in  twenty-one  of  the  large  deceased  estates  left  in  New  Zealand 
- — estates  of  over  £100,000  ($500,000),  and  some  of  them  were  a 
good  many  hundreds  of  thousands  —  not  one  brass  farthing  was  left 
to  any  pubhc  inititution,  whether  it  be  for  charitable  purposes  or  for 
education.  This  matter  of  impressing  their  legal  obligation  on  the 
people  has  been  in  a  large  measure  forced  on  the  Government  by  the 
fact  that  the  wealthy  sources  which  should  most  freely  contribute, 
were  not  as  helpful  as  they  generally  have  been  elsewhere."  (Par- 
liamentary Debates,  vol.   148,  p.  486.) 

The  number  of  pensioners  and  the  total  expenditure 
is  certain  to  increase  from  year  to  year.  The  scope  of  the 
An  Increasing  ^-^  was  widened  by  the  Amendment  of 
Proportion  of  1 90S,  wath  the  result  that  the  number  of 
Old  People  pensioners  increased  by  827  in  th6  year 

accept  Pensions  e,ifi|,T|g  March  31,  1909,  as  compared 
with  an  increase  of  only  312  in  the  previous  year.  In 
1908  it  was  estimated  that  32  per  cent,  of  the  European 
population  eligible  by  age  and  residence  were  receiving 
pensions,  but  in  1909  the  number  w^as  about  34  per  cent, 
of  those  eligible.  In  case  the  percentage  rises  to  40  per 
cent.,  the  expenditure  in  the  year  1913,  as  estimated  by 
Sir  Joseph   Ward,   will   be   £463,000.      (Parliamentary 


OLD  AGE  PENSIONS  195 

Debates,  vol.  145,  p.  750.)  If  Parliament  should  decide 
to  exempt  the  value  of  homes  from  the  computation  of 
property,  the  expenditure  would  be  increased  by  about 
£50,000,  making  a  total  expenditure  in  the  year  1913  of 
over  £500,000  ($2,500,000). 

But  it  is  likely  that  the  number  of  pensioners  will 
increase  because  of  an  increase  in  the  relative  number 
of  old  people.    In  1900,  Professor  Segar, 

of    the    University    College,    Auckland,  3*"^  ?^*^^^J!.. 
XT        ^11  •  Number  of  Old 

pom  ted  out  that  New  Zealand,  owmg  to  People  Increases 
its  recent  settlement,  had  a  larger  pro- 
portion of  young  people  and  a  smaller  proportion  of  old 
people  than  such  countries  as  England  and  France,  but 
that  the  proportion  of  old  people  was  increasing  from 
year  to  year.    Professor  Segar  says : 

"If  New  Zealand  had  permanently  an  annual  number  of  births 
equal  to  about  20,000,  the  total  population  would  reach  ultimately 
about  1,100,000,  and  of  these  no  less  than  120,000,  or  10.9  per  cent, 
of  the  whole,  would  be  old  people  eligible  in  respect  of  age  for  old 
age  pensions,  that  is,  the  number  of  old  age  pensioners  might  be 
expected  to  increase  about  fivefold  while  the  whole  population 
increased  only  about  30  or  40  per  cent. 

"  But  not  only  have  we  a  larger  proportionate  increase  in  the 
cost  of  pensions  to  expect  from  this  source,  but  we  must  expect  in 
the  future  a  larger  percentage  of  the  old  people  to  receive  old  age 
pensions  than  have  hitherto  taken  advantage  of  them,  and  this 
for  several  reasons.  The  majority  of  old  people  of  the  present  day 
arrived  here  in  the  early  day  of  the  Colony  and  it  must  be  expected 
for  several  reasons  that  of  these  a  greater  proportion  will  have  suc- 
ceeded in  attaining  easy  circumstances  and  providing  for  old  age 
than  will  generally  succeed  in  so  doing  among  a  population  living 
through  times  of  more  normal  conditions.  Again,  there  will  be 
gradually  a  smaller  and  smaller  number  of  old  people  disinclined  to 
accept  pensions  because  of  their  savouring  of  charity  and  poor 
relief,  and  a  smaller  and  smaller  number  who  will  be  disqualified  on 
account  of  not  having  lived  the  requisite  number  of  years  in  the 
Colony.  Moreover,  when  commercial  depression  once  more  returns 
to  us,  many  now  barely  provided  for  will  feel  the  need  of  help." 
(Transactions  of  the  New  Zealand  Institute,  1900,  vol.  33.) 

Professor  Segar's  criticism  is  not  directed  against  the 
principle  of  old  age  pensions,  but  merely  against  the 


196     STATE  SOCIALISM  IN  NEW  ZEALAND 

fallacy  of  supposing  that  the  cost  would  increase  only 
The  Relative  ^"  proportion  to  the  population  and  the 
Number  of  the  wealth  of  the  people.  However,  the 
Aged  Poor  likely  wealth  of  New  Zealand  has  increased  dur- 
to  Increase  jj^g  ^|^g  pg^g^  ^^j^  years,  more  rapidly  than 

the  population,  and  the  cost  of  old  age  pensions  has  not 
yet  become  a  heavy  burden.  Mr.  Laurenson  said  in  the 
House,  when  the  Amendment  of  1908  was  under  dis- 
cussion: 

"  Those  of  us  who  have  taken  an  interest  in  politics  will  remem- 
ber the  chorus  of  criticism  that  was  directed  against  the  measure  when 
it  was  passed,  and  how  it  was  denounced  by  every  one  who  believed 
in  what  he  called  "  individualism."  Yet  we  have  seen  it  grow  more 
and  more  popular,  until  now  not  one  reasonable  man  raises  his  voice 
against  the  principle  of  old-age  pensions  for  the  deserving  poor. 
And  when  we  remember  that  it  is  only  sixty  years  ago  since  Ruskin 
prophesied  that  the  day  would  yet  come  in  civilized  communities 
when  it  would  be  looked  upon  as  much  a  matter  of  course  that  a  man 
who  had  served  his  country  with  his  spade  should  draw  a  pension 
as  the  man  who  had  served  his  country  with  his  sword,  we  begin 
to  realize  how  quickly  public  opinion  changes."  (Parliamentary 
Debates,  vol.  145,  p.  760.) 


CHAPTER  XII 

THE  PUBLIC  SERVICE 

A  Cabinet  Minister  recently  stated  that  no  less  than 
130,000  persons  in  the  Dominion,  out  of  a  total  population 
of  about    1,000,000,    were  directly  de- 
pendent on  the  State.     (The  Hon.  J.  A.        p'^lt-   "o*" 
Millar  at  Wellington,  July  5,  1909.)    The  ^^^^ 
following  is  an  approximate  estimate  of 
the  number  of  employees  in  the  different  departments: 
(The  writers  are  indebted  to  the  Hon.  J.  A.  Millar  for 
these  figures,  who  says:   "It  must  be  clearly  understood 
that  the  figures  are  approximate." 

Railways say    13,000 

Co-operative  labourers 

Post  and  Telegraph 

School  Teachers 

Police 

Coal  Miners 

Lighthouses 

Other  State  Departments 


10,000 

8,000 

4,000 

850 

700 

250 

3-500 


40,300 

If  to  these  State  employees  we  add  the  old-age  pen- 
sioners, numbering  about  14,000,  we  have  a  total  of 
54,000  persons  in  the  pay  of  the  State,  most  of  whom  are 
adults  and  voters,  and  they,  with  their  dependents, 
allowing  only  21-2  persons  to  a  family,  would  number  at 
least  130,000,  as  in  Mr.  Millar's  estimate.  In  other 
words,  one  eighth  of  the  people  of  New  Zealand  are 
directly  dependent  on  the  State. 

Out  of  the  total  number  of  State  employees,  a  large 
number,  including  the  co-operative  labourers  and  many 

197 


198      STATE  SOCIALISM  LN  NEW  ZEALAND 

casual  employees  in  various  departments,  cannot  be 
regarded  as  belonging  to  the  public  service  in  the  nar- 
rower sense  of  that  word.  Indeed,  a  distinction  is  some- 
times drawn  between  the  public  service  and  the  civil 
service,  the  latter  being  a  smaller  circle  than  the  former 
and  composed  of  persons  who  have  entered  the  service 
through  the  door  of  competitive  examination  and  who 
may  expect  permanent  employment  and  promotion  in 
the  regular  way. 

In  the  early  days,  strict  regulation  as  to  appointments 
to  the  Service  was  not  felt  to  be  necessary,  for,  until  the 
abolition  of  the  provinces  in   1876,  the 
Appointment  to  number  of  persons  in  the  employ  of  the 
the  Service  general   Government    was   small.      The 

Civil  Service  Act  of  1866  expressly  pro- 
vided that  the  entrance  examination  was  not  to  be  com- 
petitive, and  as  there  was  no  fixed  standard  it  soon  fell 
into  disuse  and  appointments  were  practically  made  at 
the  pleasure  of  the  Ministry. 

A  new  chapter  was  opened  in  1886  by  the  passing  of 
the  Civil  Service  Reform  Act,  of  which  the  cardinal 
feature  was  a  system  of  competitive 
Competitive  examinations  as  the  door  to  the  Civil 
Examinations  Service.  This  was  contrary  to  the  wishes 
of  the  Premier,  Sir  Robert  Stout,  who 
brought  in  the  Bill,  for  he  held  that  competitive  examina- 
tions would  discriminate  in  favor  of  town  children 
because  of  their  special  educational  advantages.  Sir 
Robert  Stout  therefore  recommended  a  pass  examina- 
tion, not  too  severe,  with  the  right  of  nomination  by 
members  of  Parliament  in  rotation  so  as  to  draw  the 
Service  from  all  parts  of  the  Colony  and  to  free  it  from 
party  control.  He  quoted  the  system  of  admission  by 
nomination  to  the  L^nited  States  Navy,  which,  in  his 


THE  PUBLIC  SERVICE  199 

opinion,  secured  the  finest  naval  officers  in  the  world. 
(Parliamentary  Debates,  vol.  55,  p.  367 ;  Political  Address 
by  the  Hon.  Sir  Robert  Stout,  at  Marton,  March  11, 
1887.) 

This  proposal  passed  the  Lower  House  but  was 
rejected  by  the  members  of  the  Upper  House,  apparently 
because  they  were  given  no  right  of  nomination,  and  an 
amendment  embodying  a  system  of  competitive  exami- 
nations was  inserted  which  was  grudgingly  accepted  by 
the  Lower  House  and  has  remained  an  essential  part  of 
the  Civil  Service  Act  until  the  present  day.  (Civil 
Service  Amendment,  1908.)  However,  it  was  obvious 
that  in  some  cases  experts  would  be  required  who  could 
not  be  got  from  the  ranks;  therefore  a  clause  was  inserted 
dispensing  with  examinations  as  regards 

"  persons  skilled  in  medicine,  law,  navigation,  science,  technical  art, 
or  the  management  of  live  stock,  or  in  naval  or  military  matters  or 
extra  clerks."     (Civil  Service  Reform  Act,  1886.) 

Before  many  years  had  passed  it  was  discovered  that 
the  list  of  exemptions  could  be  made  elastic  enough  to 
restore  political  patronage  to  an  aston- 
ishing degree,  by  a  liberal  interpretation  patronage 
of  the  terms  "  skilled  persons "  and 
"  extra  clerks."  The  "  extra  clerks  "  contemplated  by 
the  Act  were  census  and  valuation  clerks  to  be  appointed 
temporarily  for  special  emergencies,  but  from  1890 
onwards,  extra  clerks  were  appointed  and  retained  in 
such  numbers  as  to  largely  defeat  the  intention  of  the 
Act.  In  1906  Mr.  Seddon  stated  that  between  1893  and 
1904,  548  cadets  had  been  appointed  to  the  Civil  Service 
and  439  experts.  They  came  to  be  spoken  of  in  Parlia- 
ment and  elsewhere  by  the  curious  name  of  "  permanent 
temporary  clerks."  They  were  distinct,  on  the  one  hand, 
from  casual  clerks,  inasmuch  as  they  remained  in  per- 
manent employment  without  any  permanent  appoint- 


200     STATE  SOCIALISIXI  IN  NEW  ZEAL^^ND 

ment;  and,  on  the  other  hand,  from  regular  Civil  Ser- 
vants, inasmuch  as  they  had  none  of  the  statutory 
rights  of  Civil  Servants,  such  as  superannuation  and 
leave  of  absence. 

The  presence  of  these  clerks  in  the  Service  was  a 
constant  source  of  friction  and  complaints  were  repeated- 
ly heard  in  Parliament  to  the  effect  that 

ermanen  they  were  filling  positions  which  should 
Clerks"  be  occupied  by  qualified  cadets.    Indeed, 

in  some  departments  they  exceeded  the 
number  of  the  regular  clerks.  Year  after  year  the 
Government  was  urged  to  purge  the  Service  of  these 
"  permanent  temporary  Clerks,"  but  gradually  time 
lent  colour  to  their  claims,  and  in  1899  it  was  proposed 
to  give  them  the  full  legal  status  as  members  of  the 
Civil  Service. 

Finally,  in  1907,  when  provision  was  made  for  the 
classification  of  the  Service,  it  was  enacted  that  all  per- 
sons who  had  then  been  continuously  employed  for  the 
five  preceding  years  should  be  deemed  to  be  officers 
permanently  appointed.  No  temporary  clerk  disqualified 
for  permanent  appointment  was  thereafter  to  be  con- 
tinued in  employment  for  more  than  six  months,  nor  was 
he  to  be  temporarily  reappointed  to  the  Service  within 
six  months  after  ceasing  to  be  employed  therein;  but 
the  Governor  was  authorised,  if  he  considered  the  public 
interest  required  it,  to  make  a  temporary  appointment 
by  order  in  Council  for  more  than  six  months.  (Public 
Service  Classification  Act,  1907.) 

Under  the  present  law  appointments  to  the  Civil 

Service  are  made  in  order  of  merit  from 

Order  of  Merit    the  most   successful  candidates   at    the 

annual  examination.    In  1908  over  2,000 

candidates    sat    for    the    Civil   Service    Junior    Exam- 


THE  PUBLIC  SERVICE  201 

ination,  many  of  whom  had  no  intention  of  entering  the 
Civil  Service  but  took  the  examination  as  a  test  of  their 
ability,  as  a  credential  in  seeking  private  employment, 
or  for  other  purposes. 

The  Civil  Service  examination  is  not  required  for 
admission  to  either  of  the  two  largest  branches  of  the 
Public  Service,  namely,  the  Railways  Departments 
Department  and  the  Post  and  Telegraph  not  requiring 
Department.  Applications  for  admis-  the  Civil  Service 
sion  to  these  are  made  in  accordance  with  Examination 
departmental  regulations.  No  person  is  eligible  for 
employment  in  the  Railway's  if  two  or  more  members  of 
his  family  are  already  in  the  service,  and  there  is  a  simi- 
lar regulation  in  the  Post  and  Telegraph  Department. 
Selected  applicants  for  the  Railways  must  pass  a  medical 
test,  and  are  deemed  to  be  on  probation  for  the  first  three 
years.  Certain  educational  qualifications  are  required, 
varying  from  the  "  third  standard  "  of  the  State  schools 
to  the  passing  of  the  Civil  Service  Junior  examination  or 
th-e  University  Matriculation  examination. 

The  securing  of  appointments  to  these  departments 
affords  some  scope  for  the  use  of  political  patronage  by 
Members  of  Parliament.  Until  recently,  the  Minister  for 
Railways  made  appointments  to  most  of  the  lower 
branches  of  the  Service  on  the  recommendation  of  the 
Member  for  the  District.  It  is  understood,  however,  that 
the  present  Minister,  Mr.  Millar,  has  discarded  this  plan, 
and  makes  appointments  according  to  priority  of  appli- 
cation without  regard  to  politics. 

To    Members   who   wish    to  devote    themselves    to 
larger  political  questions  the  numberless 
applications  by  seekers  of  Government      Office  Seekers 
billets    are    very    vexatious.      Mr.     A. 
W.   Rutherford,   formerly  Member  for  Hurunui,    said: 


202      STATE  SOCIALISM  IN  NEW  ZEALAND 

"  The  applications  I  receive  from  candidates  for  the  Public 
Service  are  the  worry  of  my  life;  men,  women  and  children  all 
seem  to  want  to  get  into  Government  billets." 

On  the  other  hand,  Members  have  been  known  to 

boast  to  their  constituents  of  their  success  in  securing 

billets.    The  extent  to  which  political  influence  is  sought 

is  well  summed  up  by  Mr.  F.  E.  Baume,  K.C.,  Member 

for  Auckland  East,  who  said  recently  in  Parliament: 

"  Members  of  Parliament  are  to  a  large  extent  labour  agents; 
there  is  not  one  of  us  who  is  not  supposed  to  possess  some  influence 
with  the  Government  and  who  is  not  expected  to  use  that  influence 
in  behalf  of  persons  seeking  Government  billets." 

The  question  of  promotion  presents  one  of  the 
most  difficult  problems  of  the  Public  Service, 
and,  with    the  increasing  number  of  departments  and 

officers,  the  problem  becomes  more 
Promotion  difficult    from    year    to    year.      On    the 

one  hand  there  is  the  danger  of  promo- 
tion by  favoritism  or  political  influence;  or  on  the  other 
the  equal  or  greater  danger  of  promotion  by  seniority, 
which  some  scoffers  have  called  "  promotion  according 
to  senility." 

The  latest  attempt  to  solve  this  insolvable  problem 
is  the  Public  Service  Classification  Act,  1907,  a 
comprehensive    measure     providing     for     the    grading 

of  all  departments  not  already  classi- 
Classification       fied,  with  the  exception  of  one  or  two 

minor  Services.  The  Act  sets  up  a 
Public  Classification  Board  consisting  of  a  Minister  of 
the  Crown  and  such  permanent  heads  of  departments, 
not  exceeding  ten  in  number,  as  the  Governor  from  time 
to  time  appoints.  The  Board  is  to  prepare  a  scheme 
of  classification  for  all  positions,  fixing  maximum  and 
minimum  salaries,  with  annual  increments,  which  is  to 
be  submitted  to  Parliament  for  approval.    The  right  of 


THE  PUBLIC  SERVICE  203 

each  officer  to  an  increase  of  pay  is  to  be  dependent  each 
year  on  a  certificate  of  efficiency  and  good  conduct 
from  his  departmental  head. 

No  classification  has  yet  been  made  in  accordance 
with  this  Act;  partly  because  of  the  delay  occasioned  by 
the  recent  retrenchments,  partly  because  the  Board  has 
found  the  undertaking  one  of  enormous  magnitude  and 
extreme  difficulty  and  has  not  yet  reached  any  satis- 
factory results. 

The  Prime  Minister,  Sir  Joseph  Ward,  who  was  the 
first  to  grapple  with  the  classification  of  the  Railway 
Service  and  who  has  done  a  great  deal  for  the  Public 
Service  generally,  fully  realizes  the  dangers  of  political 
influence.  When  the  Classification  Bill  was  before 
Parliament  he  said: 

"  I  am  prepared  to  put  in  a  clause  making  it  illegal  for  any  Mem- 
ber of  Parliament  to  make  any  recommendation  for  appointment  or 
promotion  of  Civil  Servants.  I  think  it  will  be  better  for  the  country, 
better  for  the  service,  and  very  much  better  for  Members  of  Parlia- 
ment. 

The  chief  advantages  of  classification  are   that  it 
reduces  the  possibilities  of  political  influence  and  wire 
pulling,  and  makes  it  possible  for  offi- 
cials of  reasonable  ability  to  rise  gradu-      Advantages  of 
ally  and  steadily  to  important  and  re-      Classification 
munerative  positions  in  the  Public  Ser- 
vice.    It  secures,  too,  a  certain  kind  of  efficiency,  the 
efficiency  that  comes  from  long  service  and  much  experi- 
ence, which  is  frequently  sadly  lacking  in  public  servants 
in  the  United  States.    Incidentally,  it  relieves  Ministers 
and  Members  from  the  importunities  of  office-seekers, 
and  tends  toward  the  purification  of  politics. 

But  the  disadvantages  of  classification  are  very 
great.       The    more    thorough    and    exact    the    classifi- 


204     STATE  SOCIALISM  IN  NEW  ZEALAND 

cation  becomes,  the  more  certainly  does  it  tend  to  pro- 
motion by  seniority  rather  than  by  effi- 
Disadvantages         .  i  m-^  t-i  •      ^      j  i. 

t  /-I      f  \-      ciency  or  abihty.     This   tendency  has 
of  Classification  -'  ■'    .  ,  •' 

been  strongly  manifested  in  the  depart- 
ments already  classified,  and  it  is  certain  that  such 
a  system  fails  to  secure  the  most  efficient  men  for  the 
most  responsible  positions.  Moreover,  it  largely  takes 
away  from  the  heads  of  departments  and  sub-depart- 
ments the  power  of  appointment  and  dismissal,  a  power 
very  likely  to  be  misused,  but  which,  in  private  business 
at  least,  makes  for  individual  efficiency  and  the  har- 
monious working  together  of  individuals  toward  a  com- 
mon  end. 

To  fall  back  on  classification  is  largely  a  confession 
of  failure.    The  annual  certificate  of  "  efficiency  and  good 
conduct "    must    in   practice    be  of    a 
A  Confession       merely    negative    value,    as     indicating 
of  Failure  that  the  ofiicer  has  done  nothing  to  pre- 

vent his  promotion  rather  than  that  he 
has  shown  peculiar  aptitude  or  exceptional  intelligence. 
Besides,  the  subordinate  who  wishes  to  secure  the  favour 
of  his  chief  does  not  always  find  it  advisable  to  show 
extraordinary  ability,  which  is  more  likely  to  make  him 
a  rival  than  a  friend.  On  the  other  hand,  the  chief  who 
finds  inelificiency  in  his  staff,  or  other  evils  that  should 
be  eradicated,  is  much  inclined  to  let  things  alone,  for 
the  sake  of  peace,  and  because  he  knows  the  difficulty  of 
making  any  change  for  the  better.  When  promotion  is 
made  otherwise  than  by  seniority,  the  officers  passed 
over  often  insist  that  political  influence  has  been  at  work; 
and  the  result  is  that  such  promotions  are  very  seldom 
made.  And  yet,  a  classified  Civil  Service  is  surely 
better  than  a  "  spoils  system  "  such  as  it  common  in  the 
United  States,  where  officials  are  not  only  appointed  for 


THE  PUBLIC  SERVICE  205 

political  reasons  but  are  dismissed  when  the  opposing 
party  comes  into  power.  In  brief,  the  spoilsman  is 
inefficient  because  his  appointment  and  promotion  de- 
pend upon  political  services;  and  the  civil  servant  is 
inefficient  because  his  appointment  and  promotion  de- 
pend upon  an  artificial  classification.  Speaking  in 
Kaitangata  in  1908,  Sir  Joseph  Ward  said  that 

"  classification  was  a  very  difficult  matter  to  deal  with,  but  after 
all  it  had  to  be  recognized  that  it  was  very  much  better  for  the  Service 
as  a  whole  than  the  old  rule,  that  very  often  existed,  of  kissing  going 
by  favouritism." 

It  is  probable  that  the  chief  defect  of  the  classification 
scheme  consists  in  trying  to  classify  above  a  certain 
salary.  A  prominent  member  of  the  Classification 
Board  said  to  the  writer:  "  No  attempt  should  be  made 
to  classify  men  receiving  more  than  £250  ($1,250)  a 
year.  You  cannot  classify  brains,  and  all  attempts  to  do 
so  must  end  in  failure  and  injustice." 

The  personnel  of  the  Public  Service  in  New  Zealand 
does  not  change  with  the  accession  of  a  new  party  to 
power,  as  has  often  happened  after  a 
presidential  election  in  the  United  States,  The  Tenure  of 
and  as  regularly  occurs  after  the  election  Office  Secure 
of  a  new  party  in  most  of  the  states  of 
the  Union.  In  this  respect  the  best  traditions  of  the 
British  Civil  Service  have  always  obtained,  and  as  a 
result  each  departmental  head  renders  loyal  and  faithful 
service  to  the  political  chief  who  happens  for  the  time 
being  to  control  his  department.  The  "  spoils  "  system 
has  never  flourished  in  New  Zealand,  and  although  politi- 
cal influence  has  had  a  good  deal  to  do  with  appoint- 
ment and  preferment,  the  tenure  of  office  is  secure  to  all 
members  of  reasonable  ability,  no  matter  what  their 
political  creed,  provided  that  they  do  not  take  an  active 
part  in  politics. 


206     STATE  SOCIALISM  IN  NEW  ZEALAND 

Public  opinion  appears  to  be  growing  in  favour  of 
non-political  control  of  appointments  and  of  preferment 
in  the  Public  Service.  The  chief  motive 
A  Public  Service  that  influenced  Parliament  in  1887  in 
Board  Suggested  establishing  the  Railway  Commission 
was  to  get  rid  of  politics  in  the  manage- 
ment of  the  railways.  But  the  Commission  was  abol- 
ished in  1894  and  the  railways  reverted  to  political  con- 
trol. Prior  to  the  general  election  of  1 899  the  Progressive 
Liberal  Association  of  Canterbury  issued  a  manifesto  in 
which,  referring  to  the  Civil  Service,  it  said: 

"  The  great  dissatisfaction  which  has  arisen  over  the  manner 
of  making  appointments  to  the  Public  Service  calls  for  some  change. 
Appointments  should  be  governed  by  the  principles  of  fitness  and 
priority  of  application.  The  intercession  of  a  member  of  Parliament 
should  have  no  weight  whatever.  To  rid  the  country  of  this  debasing 
influence,  a  Public  Service  Board  should  be  appointed  for  a  term  of 
years  and  the  Board  should  have  full  control  of  the  Public  Service." 

In  1904,  Mr.  A.  L.  Herdman,  M.  H.  R.,  brought  in  a 
bill  for  the  purpose  of  setting  up  a  non-political  Board  to 

control  the  Service,  but  the  bill  was 
Opposed  by  the  blocked  by  the  Government  on  technical 
Government         grounds.     In  1905,  Mr.  Herdman  tried 

to  secure  a  vote  of  the  House  in  favour 
of  such  a  Board,  but  his  motion  was  lost  by  43  votes  to 
23.  He  complained  of  the  "  vicious  system  of  patronage 
and  political  nepotism  that  was  demoralizing  the  service." 
He  quoted  figures  to  show  that  New  South  Wales  had 
effected  large  savings  by  the  work  of  a  non-political 
board,  and  that  the  whole  service  had  been  rendered 
thoroughly  efficient  and  imbued  with  a  fine  spirit.  On 
the  other  hand,  Sir  Joseph  Ward  has  always  hotly  resisted 
the  proposal,  on  the  ground  that  Parliament  would 
thereby  lose  control  of  expenditure  and  be  replaced  by  an 
"  uncontrollable  autocracy."  He  claims  that  the  true 
reform  is  classification  of  the  Service,  with  the  retention  of 


THE  PUBLIC  SERVICE  207 

parliamentary  control.  Mr.  Herdman  again  brought 
up  the  question  in  1 909,  but  without  making  any  headway 
beyond  having  the  matter  discussed.  As  a  rule,  the 
Opposition  is  in  favour  of  reform  in  the  Service,  while 
the  party  in  power  tries  to  keep  all  the  patronage  and 
influence  it  can. 

The  question  is  a  very  difficult  one  and  much  is  to  be 
said  on  both  sides.     Non-political  boards  exist  in  New 
South  Wales,  Victoria  and  in  the  Public 
Service  of  the  Commonwealth,  and  there    Danger  of  Des- 
seems  to  be  no  serious  proposal  to  revert    potism 
to  political  control.    And  yet,  the  Syd- 
ney Bulletin  regards  the  establishment  of  such  boards  as 
a  confession  of  failure  and  an  admission  that  the  people 
are  unable  to  govern,  since  to  save  themselves  from 
their  representatives  they  must  put  all  State  departments 
under   "  a  possibly  competent  and   possibly  incapable 
despot."    (The Bullet m,  August  20,  1903.) 

On  first  impression  it  would  seem,  from  the  large 

number  constantly  seeking  admission,  that  the  conditions 

of   employment   in    the    Public   Service 

must  be  pleasanter  or  more  profitable    „.°y^™™^^ 
......  Billets  in 

than  those  prevailmg  m  private  employ-    Demand 

ment.  Entrants  to  the  Public  Service 
usually  start  at  a  higher  wage  than  beginners  in  private 
employment;  and,  while  there  are  no  great  prizes  to  be 
won,  a  fairly  good  living  is  assured;  salaries  are  regularly 
paid;  annual  rises  in  salary  are  automatic;  holiday  and 
sick  leave  are  provided  for  by  regulations;  and  the  super- 
annuation allowance  is  always  pleasantly  in  prospect 
at  the  end  of  the  journey.  The  Service  appeals  strongly 
to  many  people,  especially  those  who  shrink  from  the 
strenuous  conflict  of  private  business,  with  its  risks  of 
failure,  and  are  glad  to  exchange  tlie  chance  of  a  great 


2o8     STATE  SOCIALISM  IN  NEW  ZEALAND 

reward  for  the  security  of  a  protected  life.  Besides,  the 
PubHc  Service  offer  an  honourable  career,  very  attractive 
to  young  people  of  family  and  education,  who  do  not 
like  farming,  look  down  upon  "  trade,"  and  find  the 
"  learned    professions  "   overcrowded. 

And  yet,  there  are  some  very  serious  disadvantages 

connected  with  the  Service,  of  which  four  seem  to  call 

for  special  notice.    The  first  of  these  is 

V      ageso   ^j^g  unsatisfactory  system  of  promotion, 

the  Service: —  ,    ,      •  ,  ,  , 

Promotion  which,  while   it  may   please  those  who 

have  political  influence  and  people  of 
mediocre  ability  who  are  promoted  by  seniority,  is  dis- 
couraging to  young  men  of  special  talent  who  are  eager  to 
receive  the  reward  of  their  w^ork  and  dislike  waiting  for  an 
opportunity  to  step  into  "  dead  men's  shoes." 

The  second  disadvantage  is  the  necessity  for  period- 
ical retrenchment  due  to  the  fact  that  the  State  tends  to 

overstaff  its  departments  in  times  of 
Periodical  prosperity.    There  have  been  three  not- 

Retrenchment     able  bouts  of  retrenchment;  one  in  1880, 

another  in  1887,  and  the  most  recent  in 
1908.  The  retrenchment  of  1880  followed  the  period  of 
inflation  of  the  seventies;  when,  under  Vogel's  policy  of 
borrowing  for  immigration  and  public  works,  vast  sums 
of  money  were  spent  and  the  Public  Service  greatly  in- 
creased in  numbers.  Parliament,  in  a  fit  of  economy, 
passed  a  drastic  resolution:  "  That  a  reduction  be  made 
of  not  less  than  10  per  cent,  from  all  salaries,  pay  and 
wages,  except  officers  of  the  legislature.  That  the 
Government  make  as  large  a  reduction  in  the  staff  of 
officers  as  can  be  effected  by  amalgamation  and  reor- 
ganization of  offices,  and  that  such  public  offices  as  are 
not  indispensable  to  the  efficient  conduct  of  public  busi- 
ness should  be  abolished." 


THE  PUBLIC  SERVICE  209 

In  1887  the  Government  was  again  embarrassed,  and 
Sir  Harry  Atkinson  was  called  on  to  rehabilitate  the 
finances  of  the  Colony.      In  his  Budget  of  1887  he  said: 

"  Our  chief  difficulties  have  arisen  in  a  great  measure  from  a 
too  lavish  expenditure,  more  especially  of  borrowed  money;  that 
must  be  stopped,  and  our  first  duty  therefore  is  to  apply,  the  pruning 
knife  with  an  unsparing  hand." 

In  pursuance  of  this  policy,  Sir  Harry  Atkinson  placed 
the  railways  under  a  non-political  Commission;  he 
reduced  the  allowance  of  the  Governor,  the  Premier  and 
the  other  Cabinet  Ministers;  and  reduced  the  cost  of  the 
Civil  Service,  which  then  stood  at  over  £1,000,000  a 
year,  by  nearly  one  fourth. 

As  soon  as  prosperity  returned,  the  Colony  entered 
upon  another  period  of  public  borrowing  and  expendi- 
ture; the  Public  Service  again  increased 

unduly  in  numbers;  and,  in  1908,  another  ^^^'^^  Expendi- 

.     ;     r  ,  /  ,    ture  in  Good 

period  of  retrenchment  was  maugurated.  Times 

The  fact  that  Sir  Joseph  Ward  an- 
nounced that  he  intended  to  effect  economies  in  the 
Public  Service  amounting  to  a  quarter  of  a  million 
annually,  "  without  in  any  way  impairing  its  efficiency," 
shows  clearly  that  the  Service  had  grown  beyond  all  re- 
quirements and  was  again  to  be  sacrificed  for  the  sins  of 
politicians.  The  total  number  of  "  retrenched  "  officials 
at  this  time  was  940.  The  Government  set  aside  certain 
blocks  of  land  for  their  benefit,  but  with  what  success 
civil  servants  may  be  transformed  into  farmers  remains 
to  be  seen.  (Budget,  1909,  p.  xvi.)  In  his  speech  at 
Winton  on  May  5,  1910,  Sir  Joseph  Ward  announced  that 
the  enforced  retrenchment  had  resulted  in  a  saving  of 
£98,970;  and  that,  because  of  return  of  prosperity,  no 
further  retrenchment  would  be  necessary.  {Otago  Daily 
Times,  May  6,  1910.) 


210     STATE  SOCIALISM  IN  NEW  ZEALAND 

The  third  special  disadvantage  of  the  Service  arises 
from  the  fact  that  in  certain  occupations  the  State  is  the 
only  employer  of  labour.     Many  years 
Public  Servants  ^  ^^^jj^^  ^^^^     j^^^  among  the  tele- 

Dependent   on         '='  .  ^  r,      ,        ,         , 

the  State  graph  operators  in  New  Zealand;    they 

were  dismissed  from  the  Service  and 
found  it  impossible  to  get  work  elsewhere.  They  went 
to  Australia  in  search  of  work,  but  the  New  Zealand 
Government  had  anticipated  their  movements  and  re- 
quested the  Australian  Governments  to  refuse  to  assist 
them.  The  case  is  perhaps  an  isolated  one  and  not  of 
much  practical  importance,  but  it  shows  at  least  the  pos- 
sibility of  the  State's  establishing  a  tyranny  from  which 
certain  classes  of  labourers  might  find  it  difficult  to  es- 
cape. Up  to  the  present,  however,  the  civil  servants  have 
not  shown  any  marked  subservience  toward  their  em- 
ployer, the  State;  on  the  contrary,  they  are  sometimes 
criticised  as  being  too  independent  of  the  State  and  of 
the  people  whom  they  are  supposed  to  serve. 

Far  more  serious  than  this  is  the  disadvantage  imposed 
upon  members  of  the  Public  Service  in  that  they  are  not 

allowed  to  take  an  active  part  in  politics. 
Public  Servants    /--..,    o        •        t-.        i    .•  j 

n  13..-  Livil    Service    Regulation    22    reads    as 

in    Politics  ^ 

follows: 

"In  order  that  officers  of  all  ranks  may  be  enabled  to  render 
loyal  and  efficient  service  to  Government,  it  is  necessary,  and  they 
are  hereby  expressly  enjoined  not  to  take  any  part  in  political  affairs 
otherwise  than  by  recording  their  votes  at  elections;  and  every 
violation  of  this  regulation  will  be  forthwith  visited  with  such  penalty 
as  the  circumstances  of  the  case  shall  appear  to  require." 

The  rule  in    the    Railways    Department,   published 

in  April,  1907,  is  very  similar: 

"  Members  are  not  to  take  an  active  part  in  politics  beyond 
recording   their   vote." 

The  case  of  J.  A.  McCullough,  a  tinsmith  employed 
in  the  Railway  workshops  at  Addington,  well  illustrates 


THE  PUBLIC  SERVICE  211 

the  working  of  this  rule.  The  conduct  complained  of  was 
that  Mr.  McCullough  was  tlie  mover  of  a  motion  hostile 
to  the  Ward  Government,  which  was  carried  at  a  meeting 
of  the  Independent  Political  Labour  League.  He  was 
dismissed  in  September,  1907,  but  afterwards  notified 
that  if  he  gave  a  written  undertaking  to  comply  with  the 
regulations  he  would  be  allowed  to  resume  duty.  This 
he  refused  to  do,  on  the  ground  that  he  had  been  per- 
mitted for  many  years  to  take  an  active  part  in  politics 
unmolested  and  unwarned  by  the  Department.  He 
said: 

"  I  look  upon  the  exercise  of  my  political  rights  as  a  sacred  duty 
I  owe  to  my  children  and  my  country'.  This  restriction  is,  in  my 
opinion,  besides  being  undemocratic  and  illiberal,  entirely  unneces- 
sary and  uncalled  for.  If  enforced  it  will  tend  to  make  the  public 
servants  of  the  country  a  crawlsome  and  opinionless  body  of  men  and 
women,  who  will  lose  their  courage  to  express  their  views  because  of 
this  restriction." 

The  question  was  brought  before  Parliament  and 
occasioned  an  animated  debate.  On  the  side  of  Mr. 
McCullough  it  was  stated  that  he  did  not  know  of  the 
rule,  that  he  had  received  no  warning,  that  public 
servants  had  frequently  been  active  supporters  of  the 
Government  and  had  not  been  reprimanded  for  their 
activity,  that  public  servants  ought  to  have  all  the  rights 
of  citizens,  and  that  capable  men  among  them  were  need- 
ed in  the  political  life  of  the  Dominion.  Mr.  Barclay 
went  so  far  as  to  propose  a  bill  of  a  single  clause  to  the 
effect  that: 

"  From  and  after  the  date  of  the  passing  of  this  Act  no  person 
in  the  employ  of  the  Dominion  of  New  Zealand  in  any  of  the  public 
services  shall  be  dismissed  or  discharged  only  for  the  expression  of 
his  or  her  views  or  opinions  on  political  affairs." 

The  bill  was  not  taken  seriously,  even  by  the  mover 
himself. 

The  opinion  of  the  House  was  almost  unanimously 


212     STATE  SOCIALISM  IN  NEW  ZEALAND 

in  favour  of  the  Government's  action,  although  there 
was  some  criticism  of  the  laxity  of  the 
TheMcCullough  Government  in  enforcing  the  rule  in  the 
<^ase  past.    Mr.  Okey  said: 

"  This  matter  of  public  servants  taking  an 
interest  in  political  matters  has  been  going  on  for  some  time — in 
fact,  in  the  past  it  has  been  encouraged  by  the  previous  Govern- 
ment to  such  an  extent  that  it  was  felt  that  a  man  could  not  get 
work  under  the  Government  unless  he  supported  them." 

Mr.  Alison  said: 

"  I  have  contested  two  parliamentary  elections,  and  in  each 
contest  found  quite  an  array  of  public  servants  working  against  me. 
.  .  .  I  know  it  has  been  the  custom  of  a  proportion  —  I  do  not 
say  a  very  large  proportion,  perhaps — ^  of  the  people  employed  by 
the  State  to  take  a  very  active  part  in  connection  with  politics.  If 
this  sort  of  thing  is  going  to  be  allowed,  we  shall  very  soon  get  to  the 
position,  referred  to  this  afternoon,  in  some  of  the  American  states, 
where,  when  a  party  in  power  goes  out  of  office,  all  the  prominent 
officials  go  with  them." 

Naturally,  the  members  of  the  Opposition  were  glad 

to  have  the  Government  to  take  a  strong  stand  against 

allowing  the  public  servants  to  meddle  in  politics. 

Sir  Joseph   Ward,  in   defending  the   Government's 

action,  said  that  Mr.  McCullough  must  have  known 

The  Public  that   he    was    acting    contrary    to    the 

Servants  must     rules  of  the   Public  Service,  and  that  in 

not  rule  the         several  other  cases  public  servants  had 

ountry  been   dismissed    few    the  same  offence, 

although  they  had  not  been  opposing  the  Government. 

He  said : 

"  It  is  impossible  to  allow  the  impression  to  go  abroad  over  New 
Zealand  that  the  Public  Service,  because  of  the  fear  or  weakness  of 
the  Government,  is  going  to  be  allowed  to  rule  New  Zealand.  I  am 
persuaded  that  the  people  of  this  country  would  not  allow  a  system 
of  that  sort  to  be  permitted  by  any  Government."  (Parliamentary 
Debates,  vol.  141,  pp.  233-235,  265-287.) 

The  people  of  New  Zealand,  like  those  of  Australia, 
fully  appreciate  the  danger  of  allowing  the  members  of 


THE  PUBLIC  SERVICE  213 

the  public  service,  now  very  numerous,  to  take  an  active 
part  in  politics.  It  is  thought,  and  with  good  reason, 
that  they  would  throw  the  weight  of  their  influence  on 
the  side  of  the  party  that  would  do  the  most  for  them  in 
the  way  of  paying  higher  salaries,  granting  larger  retiring 
allowances  and  making  other  concessions  contrary  to  the 
interests  and  wishes  of  the  rest  of  the  people.  This  would 
be  a  new  form  of  exploitation,  the  exploitation  of  those 
outside  the  public  service  by  those  within,  an  abuse 
which  it  would  be  very  hard  to  eradicate,  in  case  a 
Government  allied  itself  with  the  public  servants  and 
used  its  power  in.other  directions  in  an  unscrupulous  way. 
So  the  people  of  New  Zealand,  most  of  whom  are  not 
public  servants,  regard  themselves  as  the  employers  of 
the  public  servants;  and,  while  allowing  them  to  vote, 
partially  disfranchise  them  by  forbidding  them  to  take 
an  active  part  in  politics  on  one  side  or  the  other.  The 
general  opinion  on  this  question  is  well  expressed  by  the 
Evening  Post: 

"  If  the  Government  does  not  rule  the  Civil  Service,  then  the 
Civil  Service  will  rule  the  Government."  {Evening  Post,  October 
3.  1907.) 

In  reading  this  pregnant  sentence  one  is  strongly 
reminded  of  the  opinion  frequently  expressed  in  the 
United  States,  to  the  efl"ect  that  if  the  Government  does 
not  rule  the  trusts  the  trusts  will  rule  the  Government. 

The  issue  involved  in  the  McCullough  incident  must 

come  up  for  decision  with  increasing  frequency  as  the 

Public  Service  expands  in  numbers  and 

influence.     That  public  servants  should    ^^^^^  !*'*'i^"^r 
,      ,  r       1-  •  11-11       ^"d  the  Public 

be  kept  out  01  politics  seems  to  be  highly    service 

desirable,  but  that  it  will  be  possible  to  do 

this  when  they  constitute  a  majority  of  the  people  is  by  no 

means  likely.    If  the  functions  of  Government  are  to  go 


214      STATE  SOCIALISM  IN  NEW  ZEALAND 

on  increasing,  the  power  of  the  PubHc  Service  also  will 
increase,  and  sooner  or  later,  for  good  or  ill,  the  country 
will  be  governed  by  the  Public  Service. 

As  to  Mr.  McCullough,  he  was  dismissed  from  the 
Railway  Service;  but  in  November,  1907,  he  was  elected 
by  the  workers'  unions  to  be  workers'  representative  on 
the  Arbitration  Court.  (Annual  Report  of  the  Depart- 
ment of  Labour,  1908.) 

There  are  many  other  interesting  questions  connected 
with  the  Public  Service,  which  it  is  impossible  to 
consider  within  the  limits  of  a  single  chapter.  By 
far  the  most  important  of  these  is 
Efficiency  the  question  of  efficiency,  which  is  at 

the  same  time  the  most  difficult  to  an- 
swer. Efficiency  may  be  defined  as  the  securing  of  a 
maximum  of  utility  at  a  minimum  of  cost.  On  the  side  of 
utility,  the  Public  Service  is  seen  to  be  doing  a  great  deal 
of  work  for  the  public  benefit  and  to  be  doing  it  well. 
On  the  side  of  cost,  it  appears  as  though  the  expenditure, 
per  unit  of  result,  were  higher  than  the  corresponding 
expenditure  in  large  private  undertakings.  True,  the 
Government  can,  and  does,  compete  with  private  enter- 
prise in  the  selling  of  insurance,  the  lending  of  money,  the 
mining  of  coal,  and  the  like;  but,  after  supplying  com- 
modities and  services  at  a  competitive  price,  little  or  no 
profit  is  left  to  the  Government,  while  private  companies 
can  supply  the  same  things  at  the  same  price  and  yet  earn 
a  profit  over  and  above  interest  on  the  capital  employed. 
It  may  be  said  that  the  profit  which  the  Government 
might  earn  has  gone  to  the  employees  of  the  Government 
in  the  form  of  higher  wages  or  other  concessions  not 
granted  by  private  employers,  but  it  is  not  clear  that  this 
is  the  case.  It  is  possible,  if  not  probable,  that  the  profit 
has  been  extinguished  by  a  reduction  in  the  amount  of 


THE  PUBLIC  SERVICE  215 

the  product  per  unit  of  labour  employed.  However, 
the  question  is  one  which  could  not  be  settled  without  an 
exhaustive  investigation  into  the  comparative  efficiency 
of  public  and  private  employees  and  into  the  true  nature 
and  social  utility  of  private  profit.  There  is  a  tendency 
toward  stagnation  in  both  public  and  private  service;  but 
the  financial  measuring  rod  can  be  more  easily  applied  to 
private  employees,  and  the  periodical  "  shaking-up " 
which  they  receive  gives  them  a  great  advantage  over 
public  servants.  The  introduction  of  modern  methods  of 
cost  accounting  would  do  much  to  increase  the  efficiency 
of  the  Public  Service. 

As  to  the  personnel  of  the  Service,  the  writers  have 
formed  the  opinion  that  it  would  be  hard  to  find  a  more 
capable  body  of  public  servants  in  any 
country   in    the   world.      The   standard     The  Personnel 
attained    by  the   Service    is    high;    the     of  the  Service 
bureaucratic  spirit   is   not   pronounced; 
there  is  little  or  no  "graft";  and  the  officials  keep  in 
touch  with  public  opinion  without  descending  into  the 
arena  of  partisan  politics.    If  it  were  possible  to  do  away 
with  political  influence  in  making  appointments,  and  if  a 
method  of  promotion  by  efficiency  rather  than  seniority 
could  be  established,  the  Public  Service  of  New  Zealand 
would  be  almost  ideal. 


CHAPTER  XIII 

THE  ARBITRATION  ACT 

With  the  exception  of  a  few  brief  intervals  of  pros- 
perity, times  were  hard  in  New  Zealand  from  1879  to 
1895.  The  population  of  the  Colony  in- 
Industrial  creased  considerably,  but  chiefly  through 
Depression  an  excess  of  births  over  deaths  rather  to 
an  excess  of  immigration  over  emigra- 
tion. From  1885  to  1891  there  was  an  excess  of  emigra- 
tion over  immigration  of  about  20,000.  This  was  the  so- 
called  "  soup-kitchen  period,"  when  wages  were  low, 
when  there  were  many  unemployed,  and  when  able-bod- 
ied men  received  aid  from  public  and  private  funds.  In 
1889  it  was  alleged  that  sweating  existed  in  Dunedin 
and  elsewhere,  especially  in  the  clothing  trade,  and  a 
Commission  of  nine  members  was  appointed  to  investi- 
gate the  matter.  Six  of  the  commissioners  found  no 
sweating  in  the  Colony,  while  a  minority  of  three  re- 
ported that  it  existed,  "  although  only  to  a  limited  ex- 
tent." One  result  of  the  investigation  was  the  passage 
of  the  Factories  Act,  1891,  designed  chiefly  for  the  pro- 
tection of  women  and  children  employed  in  factories. 
Another  result  of  this  and  other  causes  was  the  compul- 
sory arbitration  law  of  1894,  designed  chiefly  to  prevent 
strikes,  but  also  to  encourage  organization  and  improve 
the  conditions  of  labour. 

In  the  year  1890  occurred  the  great  maritime  strike, 
which  began  in  Australia  and  soon  spread  to  New  Zea- 
land, beginning  in  August  and   lasting   until    the   first 

216 


THE  ARBITRATION  ACT  217 

week  in  November.      This,  the  only  serious  strike  that 

the    Colony    had   ever    had,    made    so 

r         J  .  .  .1  ,  ,.         The  Maritime 

profound   an  impression   on  the  public      <^    ., 

mind  that  people  were  ready  to  listen  to 
suggestions  looking  toward  the  prevention  of  such  evils. 
The  suggestion  of  compulsory  arbitration  came  from 
the  side  of  the  labourers,  who,  beaten  in  the  strike, 
looked  to  the  State  to  do  for  them  what  they  had 
been  unable  to  do  for  themselves.  (Parliamentary  De- 
bates, vol.  78,  p.  161.)  The  Seamen's  Union  and  other 
labour  organizations  took  an  active  part  in  the  political 
campaign  of  1890;  helped  to  win  victory  for  the  Liberal 
Party  in  the  election  of  December  5 ;  and  strongly  sup- 
ported the  labour  legislation  which  followed,  including 
the  compulsory  arbitration  law,  the  author  of  which  was 
the  Hon.  William  Pember  Reeves,  Minister  of  Labour 
in  the  Ballance  Government. 

It  is  impossible  to  say  who  first  suggested  compul- 
sory arbitration  as  a  remedy  for  strikes.  The  thought 
must  have  occurred  to  many  minds  during  the  trying 
times  of  1890.  Even  before  the  strike,  Mr.  J.  A.  Millar, 
the  secretary  of  the  Seamen's  Union  and  of  the  Tailor- 
esses'  Union,  giving  evidence  before  the  Sweating  Com- 
mission, said  J 

"  As  to  arbitration,  my  idea  is  that  a  competent  judge  should 
be  appointed  by  the  Government  in  the  same  way  as  the  judge  of 
any  court,  and  that  he  should  call  evidence  on  both  sides.  I  mean 
a  permanent  judge,  who  should  be  paid  by  the  State  for  the  settle- 
ment of  these  disputes;  because  it  is  in  the  interests  of  the  State  that 
no  such  disputes  should  exist.  I  would  have  this  judge  assisted  by 
three  representatives  of  each  side,  who  should  call  evidence,  and  the 
decision  of  the  judge  should  be  binding  on  both  parties  for  a  certain 
time  —  say,  six  months.  If  workmen  refuse  to  obey  the  court,  pres- 
sure should  be  brought  to  bear  upon  them  by  their  societies."  (Par- 
liamentary Debates,  vol.  145,  p.  188.) 

Later  in  the  year,  Mr.  W.  Downie  Stewart,  Sr., 
brought  down  a  bill  called  the  "  Strikes  and  Board  of 


2i8      STATE  SOCIALISM  IN  NEW  ZEALAND 

Conciliation  Bill,"  based  on  the  voluntary  principle. 
Compulsory  arbitration  was  suggested  in  committee,  but 
was  strongly  opposed  by  Grey  and  Ballance.  (Parlia- 
mentary Debates,  vol.  78,  pp.  116,  166,  411.) 

But  the  passage  of  the  compulsory  arbitration  law  of 
1894  was  due  to  the  enthusiastic  efforts  of  Mr.  Reeves, 

supported  by  the  labour  leaders.  The 
Efforts  of  bill  was  first  drafted  in  1891 ,  but  did  not 

Mr.  Reeves  become  law  until  the  end  of  the  session 

of  1894,  after  it  had  been  passed  three 
times  by  the  House  and  rejected  twice  by  the  Council 
because  of  its  compulsory  features.  The  purpose  of  Mr. 
Reeves  was  two-fold.    He  says: 

"  What  the  Act  was  primarily  passed  to  do  was  to  put  an  end 
to  the  larger  and  more  dangerous  class  of  strikes  and  lock-outs.  The 
second  object  of  the  Act's  framer  was  to  set  up  tribunals  to  regulate 
the  conditions  of  labour."  (Reeves,  "  State  Experiments  in  Aus- 
tralia and  New  Zealand,"  vol.  2,  p.  135.  Parliam.entar>'  Debates, 
vol.  79,  p.  379;   vol.  145,  p.  208.) 

Mr.  Reeves'  chief  idea  was  to  prevent  strikes;  and  a 
great  deal  more  was  said  in  Parliament  about  industrial 
peace  than  about  the  improvement  in  the  conditions 
of  labour  which  the  Act  was  to  bring  about;  but  there 
can  be  little  doubt  that  the  unionists,  without  whose  help 
the  Act  could  not  have  been  passed,  thought  more  of  the 
latter  than  of  the  former  result,  and  looked  upon  the  Act 
as  an  important  part  of  the  new  legislation  for  the  bene- 
fit of  the  working  class.  (Parliamentary  Debates,  vol. 
78,  p.  185.) 

Mr.  Reeves  considered  the  compulsory  feature  essen- 
tial to  the  successful  working  of  the  law.     He  thought 

the  Massachusetts  system  of  arbitration 

Compulsion  and     ,         .^  •  j     1  ^^u   4.-^  1      ^ 

p.       ...    .  almost  ideal,  except  that  It  was  voluntary 

and  not  compulsory.  (Broadhead,  "State 

Regulation   of   Labour  and   Labour   Disputes  in   New 


THE  ARBITRATION  ACT  219 

Zealand,  p.  8.)  In  an  interesting  discussion  in  the 
House  on  September  16,  1892,  Sir  John  Hall  strongly 
attacked  the  compulsory  features  of  the  bill ;  saying  that 
they  were  opposed  to  conciliation,  designed  to  force  the 
workers  to  join  the  unions,  and  should  be  condemned  as 
class  legislation,  which  would  tend,  not  to  the  reconcilia- 
tion of  classes  but  to  their  estrangement.  Mr.  John 
Duthie  condemned  the  bill  as  a  piece  of  amateur  legisla- 
tion which  would  have  a  serious  effect  in  checking  enter- 
prise and  the  investment  of  capital.  Mr.  Harkness 
said  that  the  bill  was  drafted  wholly  in  the  interests  of 
unionism.  Mr.  James  Allen  said  that  the  workers  would 
gain  nothing  by  compulsory  arbitration.  Mr.  Fergus 
accused  the  advocates  of  the  bill  of  being  demagogues. 
Some  days  later,  in  the  Council,  Mr.  W.  Downie  Stewart 
strongly  opposed  the  bill  on  the  ground  that  it  would 
tend  to  encourage  disputes,  that  awards  would  be  hard  to 
enforce,  and  that  business  affairs  were  too  complicated 
to  admit  of  a  fair  decision  by  any  court.  In  view  of 
later  events  some  of  these  comments  seem  quite  pro- 
phetic. (Parliamentary  Debates,  vol.  78,  pp.  1 51-186, 
405-416.) 

The  bill  was  not  adequately  considered,  either  by  its 
friends  or  its  opponents.     Mr.  Reeves  says: 

"  During  the  three  years  and  a  half  in  which 
its  fate  was  in  suspense,  it  neither  roused  the  Inadequate 

least  enthusiasm  nor  attracted  much  attention.  Discussion 

Only  the  trade  union  leaders  studied  its  provi- 
sions, decided  to  support  it  and  did  so  without  flinching." 

Mr.  Reeves  admitted  that  it  was  a  piece  of  experi- 
mental legislation.  "  Frankly,"  he  said,  "  the  bill  is 
but  an  experiment,  but  it  is  an  experiment  well  worth 
the  trying.  Try  it,  and  if  it  fail,  repeal  it."  (Reeves, 
op.  cit.,  vol.  2,  p.  107.)    The  Minister  of  Labour  had  set 


220      STATE  SOCIALISM  IN  NEW  ZEALAND 

his  heart  on  the  bill;  it  had  the  support  of  the  Govern- 
ment; and,  despite  the  opposition  of  a  minority  repre- 
senting the  business  interests  of  the  Colony,  it  was 
finally  put  through,  and  received  the  assent  of  the 
Governor  on  August  31,  1894. 

The  Act  of  1894  was  entitled  "An  Act  to  encourage 
the  formation  of  industrial  unions  and  associations  and 
to  facilitate  the  settlement  of  industrial  disputes  by 
conciliation  and  arbitration." 

By  the  Amendment  of  1898  the  words,  "  to  encourage 
the  formation  of  industrial  unions  and  associations,"  were 
left  out.  The  Act  came  into  force  on  January  i,  1895, 
and  the  first  case  was  decided  toward  the  end  of  the 
year.  Mr.  Reeves  left  the  Colony  in  1896,  to  become 
Agent-General  for  New  Zealand  in  London,  afterwards 
High  Commissioner,  a  post  which  he  resigned  in  1908  to 
become  Director  of  the  London  School  of  Economics. 
Being  absent  from  the  Colony,  he  had  little  to  do  with  the 
development  of  the  Act,  which  was  amended  almost 
every  year  as  difficulties  arose  which  the  author  could  not 
have  foreseen.  The  original  Act  and  the  various  amend- 
ments were  united  into  a  Compilation  Act  in  1905, 
amended  again  in  the  same  year,  and  yet  again  in  1906. 
The  latest  and  most  important  amendment  was  made 
in  1908  (Industrial  Conciliation  and  Arbitration  Acts 
Compilation  Act,  1905;  The  Industrial  Conciliation  and 
Arbitration  Amendment  Act,  1908.) 

The  Act  as  it  stood  in  1905  has  been  described  so  many 
times  that  only  a  brief  account  of  it  is  here  given,  to- 
gether   with    some    points    not    usually 

ompi  a-      mentioned.     An  excellent   summary  of 
tion  Act,    1905  .        .  .  ,,,,<- 

the  Act  IS  given  in  Broadhead  s     State 

Regulation  of  Labour  in  New  Zealand,"     Chapter  3. 

The  Act  provides  for  the  registration  of  industrial 


THE  ARBITRATION  ACT  221 

unions  and  associations  of  either  employers  or  workers 
with  the  Secretary  for  Labour.     As  few     Registration 
as  two  employers  or  one  firm  with  two     of  Industrial 
members  may  form  a  union;  but,  in  the     Unions  and 
case    of   workers,  seven    are    required/     Associations 
The  effect  of  registration  is  to  make  a  union,  or  an  associa- 
tion of  unions,  a  body  corporate,  and  renders  both  the 
union  and  its  members  subject  to  the  jurisdiction  of  the 
Conciliation   Board  and   the  Arbitration   Court.     Any 
industrial  union  may  apply  to  the  Registrar  at  any  time 
for  the  cancellation  of  its  registration,  but  such  cancella- 
tion does  not  relieve  the  union  or  any  of  its  members  from 
the  obligation  of  any  industrial  agreement  or  award  in 
force  at  the  time,  nor  from  any  penalty  or  liability.    The 
cancellation  of  registration  on  the  part  of  an  industrial 
union  of  workers  removes  it  from  the  jurisdiction  of  the 
Board  and  the  Court;  but  employers  cannot  thus  escape. 
Arbitration,  then,  is  in  a  sense  voluntary  for  the  workers 
but  compulsory  for  the  employers. 

The  Colony  is  divided  into  eight  industrial  districts 
in  each  of  which  there  is  a  Clerk  of  Awards,  appointed 
by  the  Governor.     In  every  industrial 
district  there  is  a  Board  of  Conciliation      industrial 
for   the   settlement   of   disputes   arising      Districts 
within  the  district.    The  Board  consists 
of  three  or  five  members,  one  or  two  being  elected  by  the 
industrial  unions  of  employers,  an  equal  number  by  the 
industrial  unions  of  workers,  and  the  third  or  fifth,  as  the 
case   may   be,   elected    by   the    other    members.     The 
Amendment  Act  of  1908  abolished  the  Boards  of  Concili- 
ation and  provided  for  Councils  of  Conciliation  to  take 
their  places. 

*  By  the  Amendment  Act  of  1008,  the  number  of  persons  necessary  to  register 
an  industrial  union  was  increased  from  two  to  three  in  the  case  of  employers,  and 
from  seven  to  fifteen  in  the  case  of  workers. 


222      STATE  SOCIALISM  IN  NEW  ZEALAND 

An  industrial  dispute  can  be  brought  before  a  Board 
through  the  Clerk  of  Awards  by  a  trade  union,  indus- 
trial   union,    industrial    association,    or 
Disputes  employer.     If  a  settlement  is  arrived  at 

by  the  parties,  it  is  set  forth  in  an  indus- 
trial agreement;  otherwise  the  Board  makes  a  recom- 
mendation for  the  settlement  of  the  dispute,  which 
becomes  enforceable  as  an  industrial  agreement  unless 
the  dispute  is  referred  to  the  Arbitration  Court  within 
one  month. 

Before  the  year  1901,  a  case  referred  to  a  Board  had 

to   be  heard    by  that   body  before  it  could    go   to  the 

Arbitration  Court;  but  in  that  year  an 

g  ^^^^^      ®         amendment  was  passed  permitting  either 

Conciliation         Party,  after  going  through  the  formality 

of  filing  the  dispute  with  the  Board,  to 

refer  the  matter  to  the  Court,  without  any  hearing  by 

the  Board  or  any  agreement  or  recommendation.     The 

old  rule  was  re-established  in  1908. 

A  neglected  clause  of  the  Act  provides  for  the  creation 
of  a  special  board  of  conciliators  composed  of  experts  in 
the  particular  trade  to  which  a  dispute  relates,  elected 
in  equal  numbers  by  the  employers  and  the  unions 
of  workers  concerned,  and  vacating  their  office  on  the 
settlement  of  the  dispute.  Oddly  enough,  such  a  board 
has  been  set  up  only  once,  in  the  case  of  the  strike  of  tram- 
way employees  in  Auckland  in  May,  1908.  The  new  con- 
ciliation councils  established  by  the  Act  of  1908  are  very 
similar  to  these  special  boards. 

There  is  one  Court  of  Arbitration  for  the  whole  of 

New    Zealand.       It     consists    of    three 

f  A  b't    f  members  appointed  by    the    Governor: 

a    President,    who  has  the  status  of  a 

judge  of  the   Supreme  Court,    and    two    other    mem- 


THE  ARBITRATION  ACT  223 

bers,  often  called  assistants  or  assessors.  One  of  the 
assessors  is  appointed  on  the  recommendation  of  the 
industrial  unions  of  employers,  the  other  on  the  recom- 
mendation of  the  industrial  unions  of  workers.  By  an 
amendment  passed  in  1906,  the  title  of  "  President  of  the 
Court  "  was  altered  to  "Judge  of  the  Court."  Since 
the  assessors  are  inclined  to  be  partisan  in  their  decis- 
ions, the  power  is  in  the  hands  of  the  Judge. 

The  Court  may  limit  the  operation  of  any  award  to 
any  city,  town  or  other  part  of  an  industrial  district; 
or,   on   the  application   of   any   of   the 

parties,  it  may  extend  the  provisions  Limitations  and 
*  ,  ,         .,.,,.      Extensions  of 

of  an  award  to  another  mdustnal  dis-  Awards 

trict.    Thus,  a  number  of  awards  have 

been  extended  so  as  to  apply  to  the  whole  of  the  North 

Island,  and  some  have  been  given  a  still  wider  extension. 

Extension  of  awards  is  usually  granted  at  the  request  of 

employers  to  prevent  unfair  competition  on  the  part  of 

their  rivals  in  business. 

Every  award  binds  not  only  workers'  unions  but  also 
individual  workers,  whether  members  of  unions  or  not, 
working  for  any  employer  on  whom  the 
award  is  binding;  and  if  any  such  worker  Awards  binding 
commits  any  breach  of  award  he  is  liable  on  Individuals 
to  a  fine  not  exceeding  £10.    Before  the 
year  1900  only  workers'  unions  were  liable  for  breach  of 
award.     In  that  year  non-unionists  were  made  liable; 
and,  by  the  Amendment  of  1905,  individual  unionists 
also  were  made  liable.     Unions  of  employers,  unions  of 
workers,  and  individual  employers  are  liable  to  fines  not 
exceeding  £500;  but  individual  workers  are  liable  to  an 
amount  not  exceeding  £10. 

Mr.  John  MacGregor  has  drawn  attention  to  a  cur- 
ious state  of  affairs  existing  from  1898  to  1905,  when  a 


224      STATE  SOCIALISM  IN  NEW  ZEALAND 

strike  or  a  lockout,  although  it  might  be  a  dispute, 
Lockouts  and  ^^^  "^^  ^  breach  of  award  and  could 
Strikes  not  Ille-  not  be  punished  under  the  Act.  Under 
gal  from  1898  to  the  Act  as  drawn  up  by  Mr.  Reeves,  the 
*^^^  Court  could  declare  a  strike  or  a  lockout 

to  be  a  breach  of  award,  but  in  1898  the  Act  was 
amended  with  the  result  as  stated.  Referring  to  these 
years,  Mr.   MacGregor  says: 

"  An  employer  who  pays,  or  a  worker  who  accepts,  less  than  the 
minimum  wage  thereby  commits  a  breach  of  award;  but,  if  all  the 
men  employed  in  a  factory  at  the  minimum  wage  were  to  refuse  some 
morning  to  resume  work,  except  at  a  higher  wage,  they  would  not  be 
committing  a  breach,  because  the  Court  cannot  order  any  man  to 
work  for  the  minimum." 

Strikes  and  lockouts  were  made  statutory  offences 
by  the  Amendment  of  1905,  which  prescribed  fines 
not  exceeding  £100  in  the  case  of  a  union,  association  or 
employer,  or  £10  in  the  case  of  a  worker.  Under  this 
law  a  large  number  of  strikers  have  been  punished  in 
the  past  three  years. 

Fines  may  be  recovered  in  a  summary  way  under  the 
provisions  of  the  Justices  of  the  Peace  Act,  1882,  and  all 

property  belonging  to  the  judgment 
Fines  debtor  may  be  seized  and  sold  for  the 

satisfaction  of  the  debt.  Where  the 
property  of  a  union  or  association  is  insufificient  to  pay 
the  fine,  the  members  are  liable  to  an  amount  not  exceed- 
ing £10  for  each  person.  If  individuals,  employers  or 
workers,  alleging  that  they  have  no  property,  refuse  to 
pay  the  fine,  at  the  discretion  of  the  Court  they  may  be 
ordered  to  pay,  after  which,  if  they  still  refuse,  they  may 
be  imprisoned  for  contempt.  However,  imprisonment 
has  never  been  inflicted  for  this  offence;  and,  under  the 
Act  of  1908,  it  is  no  longer  permitted. 

By  the  Act  of  1905,  all  fines  were  made  payable  into  the 


THE  ARBITRATION  AC^  225 

public  account.  Before  this  time  fines  levied  upon  em- 
ployers were  paid  into  the  treasury  of  the  workers'  unions, 
a  practice  tending  to  multiply  disputes  and  encourage 
other  abuses. 

As  intended  by  its  author,  the  Act  has  greatly  en- 
couraged the  formation  of  industrial  unions  and  associa- 
tions.   Only  unions  or  associations  could 

be    registered    under    the    Act.;     hence  __  . 

•  •  •         1      1         /-         r  Unions 

workers  desirmg  to  enjoy  the  benefits  of  Encouraged 

conciliation  and  arbitration  were  obliged 
to  form  unions,  and  these  soon  were  federated  into 
associations.  The  employers,  at  first,  had  few  organiza- 
tions; but  presently,  in  order  to  combat  the  efforts  of  the 
labour  unions,  they  formed  unions  and  associations  of 
their  own. 

In  the  year  1896,  there  were  65  unions  of  workers  with 
9,370  members;  and  only  one  union  of  employers,  with 
30  members.  (J.  Ramsay  Macdonald,  "Arbitration 
Courts  and  Wages  Boards  in  Australasia,"  The  Con- 
temporary Review,  March,  1908.)  In  the  year  1908,  there 
were  325  unions  of  workers,  with  a  membership  of 
49,347 ;  and  122  unions  of  employers,  with  a  membership 
of  3,918  (Annual  Report  of  the  Department  of  Labour, 
1909,  p.  13).  Besides  these,  there  are  industrial  associa- 
tions of  employers  and  of  workers,  frequently  employing 
paid  secretaries  who  are  very  prominent  in  industrial 
disputes.  These  secretaries,  like  the  "  walking  delegates" 
of  American  Unions,  have  been  accused  of  fomenting  dis- 
putes, but  it  had  to  see  how  the  work  of  the  associations 
could  be  carried  on  without  them.  Mr.  Macdonald 
thinks  that  arbitration  has  "  taken  the  steel  out  of  the 
unions,"  that  it  has  increased  their  membership  while 
taking  away  their  fighting  spirit;  but  the  general  opinion 
among  both  employers  and  workers  is  that  unions  of  both 


226      STATE  SOCIALISM  IN  NEW  ZEALAND 

classes  have  been  greatly  strengthened,  and  the  events 
of  the  past  few  years  have  shown  that  the  workers  have  a 
good  deal  of  fighting  spirit  left.  (Aves,  Report  on  the 
Wages  Boards  and  Industrial  Conciliation  and  Arbitra- 
tion Acts.     London,  1908,  p.  203.) 

The  Act  of   1894  was  designed  to  provide  for  the 
settlement  of  serious  disputes,  such  as  would  be  likely  to 
lead  to  strikes  or  lock-outs;  but  in  prac- 
"  Disputes "         tice  any  difference    between  employers 
Multiplied  and  workers    is    considered    a    dispute 

within  the  meaning  of  the  Act.  (Par- 
liamentary Debates,  vol.  77,  p.  30;  Broadhead,  op. 
cit.,  p.  49.)  As  has  been  clearly  shown  by  Mr.  Mac- 
Gregor,  "  disputes  "  have  multiplied,  and  the  law,  instead 
of  being  used  to  settle  only  serious  cases  threatening  to 
"  arrest  the  processes  of  industry,"  has  created  something 
which  is  not  arbitration  at  all,  but  a  system  of  govern- 
mental regulation  of  wages  and  conditions  of  labour  in 
general.  (Industrial  Arbitration  in  New  Zealand, 
by  J.  MacGregor,  M.  A.,  Dunedin,  1901.  Also  other 
articles  by  Mr.  MacGregor.)  Doubtless  Mr.  Reeves 
neither  intended  nor  expected  such  an  outcome,  but  in 
the  light  of  subsequent  events  it  is  clear  that  compulsory 
arbitration  could  have  no  other  result.  Mr.  MacGregor 
very  appositely  quotes  Machiavelli's  saying:  "Let  no 
man  who  begins  an  innovation  in  a  State  expect  that 
he  shall  stop  it  at  his  pleasure  or  regulate  it  according 
to  his  intention." 

The  Arbitration  Act  was  designed  to  improve  the 
condition  of  the  working  class  as  well  as  to  prevent 
strikes;  and,  therefore,  practically  all  of 
the  disputes  have  originated  with   the 
workers,  while  the  employers  have  oc- 
cupied the  position   of   defendants.     Wages    were  low 


THE   ARBITRATION  ACT  227 

in   1894,   but   toward   the  end   of    the    following  year 

business   conditions    began    to    improve    and    an    era 

of  prosperity  began  which  lasted  without  a  break  until 

the  winter  of  1908.    Had  the  system  of  conciliation  and 

arbitration  not  existed,  the  workers  would  have  looked 

to  their  employers  to  grant  the  concessions  which  they 

desired ;  but  since  the  legal  machinery  was  at  hand  they 

proceeded  to  use  it  to  obtain  the  same  results.     When 

any  number  of  workers  desired  to  obtain  higher  wages, 

shorter  hours  or  other  concessions,  they  formed  a  union 

of  seven  or  more  persons,  were  registered  with  the  Clerk 

of  Awards  of  the  industrial  district  in  which  they  were, 

and    proceeded    to    formulate    their   demands.      These 

would  be  sent  by  letter  to  the  employers  concerned; 

and  then,  if  the  demands  were  not  granted,  a  dispute 

was  created  which  presently  came  before  the  Board  of 

Conciliation. 

Mr.  Reeves  thought  that  most  of  the  cases  would 

be  decided  by  the  Boards  and  that  only  the  most  serious 

cases    would    come    before    the    Court. 

In  the  Session  of  1894  he  said  in  Parlia-    ^       .,.  ^. 

^^  Concihation  to 

"^^"t :  Arbitration 

"  I  do  not  think  that  the  Arbitration  Court 
will  be  very  often  called  into  requisition;  on  the  contrary,  I  think 
that  in  99  cases  in  100  in  which  labour  disputes  arise  they  will  be 
settled  by  the  Conciliation  Boards;  but  unless  you  have  in  the  back- 
ground an  Arbitration  Court  the  Conciliation  Boards  will  not  be 
respected,  and  they  will  be  virtually  useless." 

Strange  to  say,  the  Boards  were  not  respected  because 
of  the  existence  of  the  Court,  and  because  it  was  so  easy 
to  appeal  to  the  higher  tribunal. 

In  the  early  years  of  the  Act  a  good    The  Boards  of 
many  cases  were  settled  by  the  Boards,    Conciliation 
but  the  contending  parties  soon  perceived    Ignored 
that  the  Boards  were  not  true  boards  of 
conciliation,   but   arbitration   courts    of    first    instance; 


228      STATE  SOCIALISM  IN  NEW  ZEALAND 

and,  wishing  to  have  the  decision  of  the  highest  tribunal, 
they  carried  most  of  the  cases  to  the  Arbitration  Court. 
The  workers  were  faily  well  satisfied  with  the  Boards, 
since  the  decisions  were  usually  in  their  favour,  but  the 
employers  were  very  much  dissatisfied,  and  through  their 
influence  the  amendment  of  1901  was  passed,  permitting 
either  party  to  a  reference  to  go  straight  to  the  Arbi- 
tration Court.  From  the  coming  into  operation  of  the 
Act  until  December  31,  1901,  51  cases  were  settled  by 
the  Boards  and  100  by  the  Court.  From  January  i ,  1902, 
to  December  31,  1905,  20  cases  were  settled  by  the 
Boards,  and  163  by  the  Court.  In  the  year  1906  only 
two  cases  were  settled  by  the  Boards;  and  in  the 
year  1907,  up  to  May3i,notone  case  was  thus  set- 
tled, although  several  recommendations  were  made. 
(Broadhead,  op.  cit.,  p.  35;  Aves,  op.  cit.,  p.  93.)  Be- 
sides, of  the  cases  settled  by  the  Boards  in  previous 
years,  it  is  probable  that  nearly  all  could  have  been 
settled  by  friendly  conciliation  without  the  intervention 
of  the  Boards.  Since  the  Act  of  1908  went  into  opera- 
tion, a  number  of  minor  disputes  have  been  settled  by  the 
new  Councils  of  Conciliation  and  the  Court  has  been 
relieved  of  many  trivial  cases. 

Many  reasons  have  been  given  for  the  failure  of 
conciliation.     Mr.  Reeves  himself  sa>s  that  the  system 
was  tedious  and     cumbrous.       (*'  State 
Failure  of  Experiments,"  vol.  2,  p.  131.)  In  one  case 

Conciliation  a  Board  spent  twenty-six  da^'S  consider- 
ing a  dispute  which  was  later  settled  by 
the  Court  in  half  a  day.  (Parliamentary  Debates,  vol. 
145,  p.  248.)  Mr.  Broadhead  says  that  the  members  of 
the  Boards  were  seldom  specially  qualified,  that  they 
were  usually  in  sympathy  with  the  labour  party,  and 
were  partisan  in  their  decisions.     (Broadhead,  op.  cit., 


THE  ARBITRATION  ACT  229 

p.  31.)  Mr.  Aves  gives  as  the  chief  cause  of  failure 
formality  of  procedure  and  partisanship.  (Aves,  op.  cit., 
p.  92.)  But  Mr.  MacGregor  points  to  the  root  of  the 
trouble  when  he  says:  "  It  is  impossible  to  combine  in 
the  same  scheme  conciliation  and  compulsory  arbitra- 
tion."     ("  Industrial  Arbitration,"  p.  21.) 

In  other  words,  conciliation  and  compulsion  are  op- 
posed to  each  other;  and  the  so-called  conciliation 
boards  are  really  arbitration  courts  of  first  instance, 
effective  only  in  so  far  as  they  exercise  a  degree  of  com- 
pulsion, but  for  the  most  part  ineffective  when  there  is 
appeal  to  a  higher  court. 

That  governmental  regulation  is  incompatible  with 
freedom  of  contract  was  brought  out  in  a  forcible  way 
by  the  Chief  Justice,  Sir  Robert  Stout, 
in  a  decision  by  the  Court  of  Appeals  in        Contract  and 
May,    1900.     He  said:  Status 

"  All  contracts  regarding  labour  are  con- 
trolled and  may  be  modified  or  abrogated.  The  Court  can  make  the 
contract  or  agreement  that  is  to  exist  between  the  workman  and  the 
employer.  It  abrogates  the  right  of  workmen  and  employers  to 
make  their  own  contracts.  It  in  effect  abolishes  contract  and  restores 
status.  The  only  way  the  Act  can  be  rendered  inoperative  is  by  the 
workmen  not  associating  or  not  joining  any  union.  No  doubt  the 
statute,  by  abolishing  contract  and  restoring  status,  may  be  a  reversal 
to  a  state  of  things  that  existed  before  our  industrial  era,  as  Maine 
and  other  jurists  have  pointed  out.  The  power  of  the  legislature 
is  sufficient  to  cause  a  reversion  to  this  prior  state,  although  jurists 
may  say  that  from  status  to  contract  marks  the  parth  of  progress. 
(Book  of  Awards,  vol.  i.,  p.  304;   Broadhead,  op.  cit.,  p.  III.) 

In  a  decision  rendered  in  July,  1906,  the  Chief 
Justice  said: 

"  The  right  of  a  workman  to  make  a  contract  is  exceedingly 
limited.  The  right  of  free  contract  is  taken  away  from  the  worker, 
and  he  has  been  placed  in  a  condition  of  servitude  or  status,  and  the 
employer  must  conform  to  that  condition."  (Broadhead,  op.  cit., 
P-  93-) 

The   judges    of    the   Arbitration    Court   have    been 


230      STATE  SOCIALISM  IN  NEW  ZEALAND 

invariably  jurists  of  high  standing.     There  have  been 

six  judges  in  fifteen  years, —  Justices 
High  Standing  Williams,  Edwards,  Martin,  Cooper, 
of  the  Judges       Chapman,   and   Sim.     The   position   of 

Judge  of  the  Arbitration  Court  is  not  a 
particularly  enviable  one,  and  the  judges  have  always 
been  glad  to  be  transferred  to  the  regular  work  of  the 
Supreme  Court. 

Some  idea  of   the  work  done  by   the   Conciliation 
Boards  and  the  Arbitration  Court  may  be  got  from  the 

fact  that  the  total  number  of  awards, 
Work  done  by  agreements  and  recommendations  made 
the  Court  under  the  Act  from  its  inception  until 

May  31,  1907,  was  535,  affecting  78 
trades,  and  including  339  awards,  137  agreements  and 
59  recommendations.  (Aves,  op.  cit.,  p.  93;  Broad- 
head,  op.  cit.,  p.  213.)  The  decisions  have  to  do  with 
butchers,  bakers,  builders,  miners,  slaughtermen,  tailors, 
tanners,  and  nearly  all  other  important  occupations 
except  agriculture,  the  professions  and  the  govern- 
mental service. 

A  recent  decision  relating  to  agricultural  labourers 
is  most  extraordinary.    It  originated  in  a  dispute  between 

the   Canterbury   Agricultural   and    Pas- 
^^^  f  toral  Labourers'  Union  and  the  Canter- 

Refused  bury  Sheepowners'  Industrial  Union  of 

Employers  and  about  7,000  farmers  in 
the  Canterbury  industrial  district.  The  dispute  was 
referred  to  the  Conciliation  Board  on  November  16,  1906, 
and  on  the  same  day  was  referred  by  the  Union  to  the 
Arbitration  Court.  After  hearing  a  great  deal  of  evidence 
and  thoroughly  discussing  the  case  in  all  its  bearings,  the 
Court  decided,  on  August  21,  1908,  that  no  award  should 
be  made,  on  the  ground  that  it  was  impracticable  to  fix 


THE  ARBITRATION  ACT  231 

any  definite  hours  for  the  daily  work  of  general  farm 
hands,  and  that  the  alleged  grievances  of  the  farm  la- 
bourers were  not  sufficient  to  justify  interference  with 
the  whole  farming  industry  of  Canterbury.  Mr.  J.  A. 
McCullough,  the  workers'  representative  on  the  Arbi- 
tration Court,  and  a  pronounced  partisan,  strongly  dis- 
sented from  the  finding  of  the  Court.  In  his  formal 
protest  he  said: 

"  It  appears  to  me  a  most  extraordinary  and  despotic  proceeding 
to  say  that  the  largest  section  of  the  workers  in  this  Dominion  should 
be  denied  the  right  to  have  the  conditions  of  their  livelihood,  their 
wages  and  hours  of  labour,  fixed  by  means  of  the  legislation  which 
has  been  expressly  provided  for  this  very  purpose."  (The  Press, 
Christchurch,  August  22,  1908.) 

And  yet,  the  Amendment  Act  of   1908,  passed  a  few 

months  later,  expressly  permits  the  Court  to  refuse  to 

make  an  award  if  for  any  reason  it  considers  it  desirable 

to  do  so. 

The  awards  and  agreements  made  under  the  Act 

cover  a  great  variety  of  subjects,  among  which  the  most 

important  are:    minimum  wages,  hours 

of  labour,  permits  to  incompetent  work-  "  ^^*^/, 

....  r  r  .     ,  Covered  by 

ers,    limitation    01    apprentices,    periods  Awards 

of  apprenticeship,  piecework,  distribu- 
tion of  work,  holidays,  meal  hours,  provision  of  tools, 
modes  of  payment,  notice  of  dismissal,  scope  and  duration 
of  awards,  interpretation  of  awards,  extension  of  awards, 
breaches  of  awards,  and  fines.  In  most  of  the  awards, 
particularly  during  the  early  years  of  the  Act,  the 
workers  gained  something.     Mr.  Aves  says: 

In  the  whole  series  of  awards,  there  has  been  only  one  Insig . 
nificant  case  when  wages  have  been  reduced,  and  two  when  hours 
have  been  increased.  There  have,  however,  been  many  instances  in 
which,  on  renewed  application  of  the  Court,  no  fresh  award  has 
been  granted,  and  when,  therefore,  conditions  have  been  left  un- 
altered."    (Aves,  op.  cit.,  p.  99.) 


232      STATE  SOCIALISM  IN  NEW  ZEALAND 

In  most  of  the  awards  a  minimum  wage  is  granted; 
and  this  is  never  a  bare  subsistence  minimum,  but  rather 
an  ideal  wage  such  as  an  able-bodied 
The  Minimum    worker  of  average  ability  ought  to  earn; 
Wage  and   it   has  generally   been   fixed   at  a 

point  higher  than  the  average  wages  pre- 
vailing in  the  trade  at  the  time  the  award  was  made. 

One  important  efTect  of  the  establishment  of  so  high 

a  minimum  wage  is  that  workers  of  less  than  average 

ability  find  it  hard  to  obtain  constant 

Injury  to  the        employment.     This  difficulty  has  been 
Inefficient  .   ,,  ,  .  , 

Worker  partially  met  by  grantmg  under-rate  per- 

mits to  such  workers.  But  most  workers, 
other  than  old  men,  do  not  like  to  be  branded  as 
incompetent,  so  that  not  many  under-rate  permits  are 
applied  for  or  granted.  During  the  years  1902  to  1907, 
1,288  permits  were  granted;  803  by  chairmen  of  con- 
ciliation boards,  614  by  secretaries  of  unions,  and  71 
by  stipendiary  magistrates,  while  in  121  cases  the 
applications  were  not  granted.    (Aves,  op.  cit.,  p.  151 .) 

An    interesting   case   occurred   after    the   Auckland 
Furniture  Trade  Award  of   February,    1903,   when  31 
workers  out  of  a  total  force  of  between 
Lockouts  and       ^qq   and    300   were  discharged    or   sus- 
lUe&al  pended   by   different  employers  on   the 

ground  that  they  were  not  worth  the 
minimum  wage  granted  by  the  award.  The  Secretary  for 
Labour,  as  well  as  the  workers'  union,  took  proceedings 
against  the  employers  for  breach  of  award,  but  the 
complaints  were  dismissed  by  Justice  Cooper,  who  held 
that  "  the  employers  had  done  nothing  beyond  what  a 
reasonable  employer  is  entitled  to  do  in  the  ordinary 
regulation  of  his  business."  (Books  of  Awards,  vol.  4, 
p.  135;    Broadhead,  op.  cit.,  p.  73.)    The  workers  were 


THE  ARBITRATION   ACT  233 

much  dissatisfied  with  this  decision,  and  an  amendment 

was  passed  in  1905  for  the  express  purpose  of  declaring 

such  action  on  the  part  of  employers  to  be  an  offence. 

"  In  order  to  maintain  an  appearance  of  equality,  it  was,  of 
course,  necessary  to  extend  the  provision  to  analogous  action  on  the 
part  of  workmen,  and  thus  it  came  about  that  strikes  as  well  as  lock- 
outs were  made  ofll'ences."  (Manuscript  by  J.  MacGregor,  1908.) 

It  is  often  stated  that  the  granting  of  a  minimum  wage 
works  a  hardship  upon  the  worker  of  more  than  average 
ability,  since  the  employers,  being  com- 
pelled to  pay  the  minimum  wage  to  a    ,,  ^^^  V},}  .^ 
,  ,  r  1  r    1  1  More    Efficient 

large  number  or   workers  01   less  than    ^Yo^kers 

average  ability,  are  unable,  if  not  un- 
willing to  pay  more  to  superior  workers.  The  general 
opinion  among  employers  and  theorists  is  that  the 
average  wage  tends  to  become  the  minimum,  the  mini- 
mum tends  to  become  the  standard,  and  the  standard 
tends  to  become  the  maximum.  (Broadhead,  op.  cit.,  p. 
72;  Aves,  op.  cit.,  p.  194;  Clark,  the  Labour  Movement 
in  Australasia,  p.  230;  "  Labour  and  the  Arbitration 
Act,"  a  speech  by  the  Hon.  Dr.  Findlay,  June  17,  1908.) 

A  recent  investigation  by  the  Department  of  Labour 
shows  that  wages  are  by  no  means  so  uniform  as  one 
would  expect  from  a  theoretical  point  of  view.  Out  of 
2,451  employees  in  factories  in  Auckland  City,  excluding 
under-rate  workers  and  young  persons,  949  received  the 
minimum  rate;  and  1,504,  or  61  per  cent,  of  the  whole, 
received  more  than  the  minimum.  In  Wellington,  the 
per  cent,  receiving  more  than  the  minimum  was  57 ; 
in  Christchurch,  47;  and  in  Dunedin,  46.  (Annual 
Report  of  the  Bureau  of  Labour,  1909,  pp.  133-143) 

The  most  reasonable  conclusion  that  one  can  draw 
from  these  facts  in  relation  to  the  theory  stated  above, 
which  certainly  has  some  validity,  is  that  the  minimum 
wages  awarded   in   most    of    the  trades  are  not  high, 


234      STATE  SOCIALISM  IN  NEW  ZEALAND 

that  the  average  worker  fully  earns  the  award  rate,  and 
that  it  pays  the  employer  in  most  cases  to  give  higher 
wages  to  the  better  men.  This  conclusion 
lo^U^uairt^  ^^  substantiated  by  a  consideration  of 
„...  the    prosperity    of     New    Zealand    and 

of  the  slight  effect  which  the  awards 
seem  to  have  had  on  the  prices  of  manufactured  articles. 
It  should  also  be  remembered  that  the  superior  worker 
is  more  regularly  employed  than  the  average,  so  that 
his  yearly  wage  must  be  higher  than  the  amount  indi- 
cated by  the  figures  of  weekly  wages  only.  But  where 
the  minimum  is  placed  too  high  there  must  be  a  tendency 
toward  a  levelling  down  of  wages,  which  cannot  but  be 
discouraging  to  the  more  efficient  worker,  and  injurious 
to  the  industrial  efficiency  of  the  Dominion.  For  this 
reason,  the  objection  of  the  unions  to  piece-work  is 
probably  ill-founded;  and,  in  so  far  as  the  Arbitration 
Court  has  decided  against  the  piece-work  system,  it  has 
injured  the  efficient  worker  and  increased  the  cost  of  pro- 
duction of  manufactured  articles. 

In  order  to  prevent  such  results.  Dr.  Findlay  has 
suggested  a  double,  or,  rather,  a  primary  and  a  supple- 
mentary standard,   the  primary  stand- 
uggestion  o        ^^^  to  be  a  "  living  wage,"  based  on  the 
Dr.  Findlay  ,^         /> „     ^   '        ,  ^    ... 

reasonable      needs      oi  workers  ot  dit- 

ferent  classes,  and  the  supplementary  wage  to  be  based 
on  the  extra  work  done  by  the  more  efficient  workers. 
In  other  words,  there  should  be  a  minimum  wage  based 
upon  the  day's  work,  and  an  additional  wage  based  upon 
the  work  of  the  day  as  a  premium  upon  efficiency. 
(Findlay,  "  Labour  and  the  Arbitration  Act,"  Welling- 
ton, 1908;  John  A.  Ryan,  S.  T.  L.,  "A  Living  Wage," 
New  York,  1906.)  Quite  apart  from  the  theoretical 
difficulties  of  Dr.  Findlay 's  suggestion,  the  proposal  to 


THE  ARBITRATION  ACT  235 

establish  an  "  exertion  wage  "  was  not  well  received 
by  the  labour  leaders  of  New  Zealand,  who  appear  to 
have  an  ineradicable  objection  to  anything  like  a  task 
system,  and  a  profound  dislike  of  "  pace-makers,  chasers, 
runners  and  bell-horses."  {The Evening  Post,  Wellington, 
July  28,  1908.) 

In  the  decisions  of  the  Arbitration  Court,  questions  as 
to  wages  and  hours  of  labour  occupy  first  place,  but  close 
after  these  comes  the  claim  of  unionists 
for    preference    of    employment.      The    Preference  to 
Act  of  1894  was  specially  designed    "to    Unionists 
encourage   the   formation   of   industrial 
unions  and  associations,"  and  at  first  non-unionists  were 
not  recognized  by  the  law  and  were  not  under  the  juris- 
diction of  the  Court.    It  was,  therefore,  natural  that  the 
Court  should  favour  them.     The  first  decision  recog- 
nizing the  unionists'  claim  to  preference  was  given  in  De- 
cember, 1896,  when  the  following  clause  was  inserted  in 
the  Canterbury  Bootmakers'  Award: 

"  Employers  shall  employ  members  of  the  New  Zealand  Feder- 
ated Bootmakers'  Union  in  preference  to  non-unionists,  provided 
that  there  are  members  of  the  union  who  are  equally  qualified  with 
non-members  to  perform  the  particular  work  required  to  be  done 
and  are  ready  and  willing  to  undertake  it."  (Book  of  Awards, 
vol.  i;  Broadhead,  op.  cit.,  p.  105.)  Since,  however,  the  employer 
was  the  judge  of  the  qualifications  of  his  employees,  the  unionists  did 
not  gain  much  by  this  decision.  In  later  awards  it  was  usually  speci- 
fied that  preference  was  granted  only  when  the  union  was  not  a 
close  guild  but  practically  open  to  every  person  of  good  character 
who  desired  to  join.  Preference  was  not  usually  granted  where  the 
unionists  were  but  a  fraction  of  those  working  at  a  trade.  (Reeves, 
op.  cit.,  vol.  2,  p.  112.) 

Among  the  arguments  in  favour  of  preference,  the 
chief  is  that  the  unionists  go  to  much 
trouble  and  expense  to  obtain  concessions,    Arguments  for 
not  only  for  themselves  but  for  other    Preference 
labourers,    and    that   non-unionists  can 
obtain  preference  by  joining  the  union.   Also,  preference  is 


236      STATE  SOCIALISM  IN  NEW  ZEALAND 

sometimes  regarded  as  a  compensation  to  unionists  foi" 
having  given  up  the  right  to  strike.  Preference,  too,  pro- 
tects active  unionists  from  being  victimized  by  their 
employers.  Again,  unionists  generally  object  to  working 
in  the  same  shop  with  non-unionists.  In  brief,  the  ques- 
tion is  practically  the  same  as  that  of  the  closed  shop  in 
the  United  States. 

Non-unionist  labourers  object  to  preference  on  the 

ground  that  it  tends  to  compel  them  to  join  the  union. 

Preference,    they    say,    in    compulsory 

rguments  unionism.     Employers  object  to  prefer- 

agamst  ,  .    .  ,  .    , 

Preference  ence  because  it  increases  the  power  oi  the 

unions  and  interferes  with  the  em- 
ployer's freedom  in  employing  and  dismissing.  In  some 
cases  they  would  discriminate  against  unionists;  whereas, 
when  preference  has  been  granted,  they  are  obliged  to 
examine  the  employment  book  kept  by  the  union  in  order 
to  give  the  unionists  the  first  chance  of  employment. 
Failure  to  do  this  is  generally  regarded  as  a  breach  of 
award. 

Preference  has  been  granted  in  most  of  the  awards. 
Out  of  159  awards  in  force  on  March  31,  1906,  preference 

had  been  granted  in  115  cases,  refused 
Unconditional      j^^  ^  ^^^    ^^^    ^^^^^    f^^.   j^^ 

Preference  \ 

Demanded  cases.      (Broadhead,    op.    cit.,    p.    II3-) 

But  since  preference  is  usually  granted 
on  conditions  similar  to  those  mentioned  above,  the 
unionists  are  dissatisfied  and  demand  unconditional 
preference,  which  w^ould  prevent  the  employment  of 
non-union  men  while  any  unionists  were  available 
whether  competent  or  not.  The  Arbitration  Court, 
except  in  a  few  minor  cases,  has  refused  to  grant  uncon- 
ditional preference,  and  the  unionists,  realizing  that  pref- 
erence to  an  open  union  is  no  preference  at  all,  now  look 


THE  ARBITRATION  ACT  237 

to  Parliament  for  redress  and  demand  statutory  uncon- 
ditional preference  to  unionists.  (Annual  Report  of  the 
Trades  and  Labour  Council  of  New  Zealand.  Dunedin, 
1907,  p.  38.)  This  the  present  Government  are  opposed 
to  granting,  and  even  Mr.  Millar,  until  lately  Minister  of 
Labour,  does  not  favour  it.  (Parliamentary  Debates, 
vol.  145,  p.  188. 

In  the  administration  of  the  Act,  the  sympathy  of 
the  Department  of  Labour  is  generally  with  the  workers, 
and  the  employers  complain  of  parti- 
aUty.  From  March  31,  1900,  to  March  ®  epar  men 
31,  1904,  there  were  213  cases  of  breach  partiality 
of  award  brought  against  employers,  in 
171  of  which  convictions  were  secured.  In  the  same  time 
there  were  only  4  cases  brought  against  workers.  Since 
the  Inspectors  of  Factories  were  made  inspectors  of 
awards,  in  1903,  more  complaints  have  been  brought 
against  workers,  particularly  those  taking  part  in  the 
strikes  of  the  past  few  years.  One  would  expect  more 
cases  of  breach  of  award  to  be  brought  against  em- 
ployers, since  the  awards  have  usually  been  made  for  the 
benefit  of  the  workers.  Also,  employers  have  little  to 
gain  by  prosecuting  workers.  When  fines  are  inflicted 
upon  employers  for  paying  less  than  award  rates,  they 
are  made  large  enough  to  include  back  wages,  except 
when  the  workers  have  knowingly  accepted  the  illegal 
rates.  The  Inspectors  frequently  recover  back  wages 
without  prosecution.  (Annual  Report  of  the  Depart- 
ment of  Labour,  1909,  p.  14.) 


CHAPTER  XIV 

COMPULSORY  ARBITRATION    IN   THEORY  AND 
PRACTICE 

There  is  a  pretty  well-defined  theory  in  justification 

of  compulsory  arbitration  in  the  minds  of  those  who 

favour   that   method  of  settUng  indus- 

leore  ica  ^^j^j  disputes.    The  competitive  system, 

Basis  of  Arbitra-  .        ,  .       .         ,  ,      i    • 

|.|^jj  m  this  view,  has  resulted  in  two  great 

evils:  sweating  and  strikes.  Under 
sweating  the  workers  receive  less  than  enough  to  secure 
a  decent  subsistence  for  a  human  being,  and  the  strike 
is  a  form  of  private  war  in  which  the  strongest  win,  not 
those  who  have  justice  on  their  side,  and  which  causes 
great  inconvenience  to  the  public,  who  are  a  third  party 
in  ev^ery  strike.  All  this  evil  and  injustice  should  be 
done  away  with  by  an  appeal  to  a  court,  which  should 
establish  relations  between  employers,  workers  and  the 
public  according  to  principles  of  justice. 

On  the  surface  the  theory  appears  to  be  highly  rea- 
sonable,  but   when    put   into   practice,    serious,    if   not 

fatal  difficulties  arise.  One  of  these  has 
Examination  of  to  do  with  the  discovery  of  specific  prin- 
the  Theory  ciples  of  justice;    the   other  with   the 

enforcement  of  awards  supposedly  just. 
So  great  are  the  difficulties  in  the  way  of  discovering 
principles  of  justice  in  the  determination  of  wages,  that 
one  of  the  most  distinguished  of  the  past  presidents  of  the 
Arbitration  Court  has  stated  that  no  such  principles 
exist. 

238 


COMPULSORY   ARBITRATION  239 

The  theory  of  fair  wages  that  appears  to  prevail 
is  the  doctrine  of  the  living  wage,  stated  both  in 
its  negative  and  its  positive  form.  Stated  nega- 
tively, the  theory  holds  that  extremely 
low  wages,  such  as  are  found  under  the  The  Living  Wage 
sweating  system,  are  not  fair  wages,  be- 
cause insufficient  to  afford  a  decent  living  according  to 
the  colonial  standard.  (Aves,  op.  cit.,  p.  100.)  Stated 
positively,  a  fair  wage  is  a  wage  which  is  sufficient  to  give 
the  worker  a  decent  living  according  to  the  colonial 
standard,  which  is  higher  than  the  British  standard, 
considerably  higher  than  that  of  continental  Europe, 
and  immeasurably  higher  than  that  of  the  Chinese  or 
Indian  coolie.  This  standard  applies,  of  course,  only  to 
the  able-bodied  worker,  because  the  aged  and  infirm  are 
not  worth  so  much  to  the  employer.  Here  is  introduced 
another  principle,  the  principle  of  payment  according  to 
the  ability  of  the  employer,  and  how  these  two  princi- 
ples can  be  reconciled  it  is  not  easy  to  show. 

Other  difficulties  arise  when  the  theories  are 
applied  to  actual  cases.  For  example,  a  wage  which 
would  be  quite  sufficient  for  a  single  man  might 
be  inadequate  for  a  married  man,  and 
should  vary  with  the  size  of  his  family  Difficulties 
and  their  ability  to  contribute  to  their 
own  support.  But  if  a  married  man  is  to  receive  more 
than  a  single  man  of  the  same  ability,  he  will  find  it  hard 
to  get  employment  except  in  the  most  properous  times. 
Again,  a  living  wage  for  a  skilled  worker  must  be  higher 
than  that  for  a  common  labourer,  since  his  standard  of 
living  is  higher.  This  arises  from  the  fact  that  skilled 
labourers  are  scarce,  but  this  introduces  another  com- 
plicating factor,  the  supply  of  labour,  which,  in  densely 
populated  countries,  threatens  to  destroy,  not  only  the 
theory  but  the  possibility  of  a  living  wage. 


240      STATE  SOCIALISM  IN  NEW  ZEALAND 

These  and  other  compHcations  prevent  the  creation  of 
a  body  of  legal  principles  defining  and  explaining  the 

nature  of  fair  or  reasonable  wages, 
No  Definite  but  do  not  prevent  the  Court  from  bear- 
Legal  Principles  ing  in  mind  the  desirability  of  keeping 

the  customary  standards  of  colonial  life 
from  falling,  and  the  equal  or  greater  desirability  of 
raising  those  standards  as  much  as  possible.  The  doc- 
trine of  a  living  wage,  then,  is  not  an  established  legal 
principle,  but  an  ideal  toward  which  people  may  strive; 
and  the  Arbitration  Court,  not  being  bound  by  precedent 
nor  hampered  by  technicalities,  and  having  legislative 
as  well  as  judicial  powers,  may  do  its  best  to  attain  the 
ideal  within  the  limits  fixed  by  economic  law.  But  one 
hears  little  about  economic  law  in  New  Zealand,  and 
much  more  about  justice  and  fairness  in  distribution, 
as  though  there  was  no  such  thing  as  market  value  and 
the  effort  to  attain  the  desirable  had  no  relation  whatever 
to  the  possible. 

The  doctrine  of  a  living  wage  is  nothing  more  than  a 
starting  point  for  the  workers  of  New  Zealand.     They 

demand  a  living  wage  and  as  much  more 
Profit  Sharing     ^^  ^j^      ^^^  Realizing  the  fact  that 

not  established  ,  rr      ^ 

by  the  Court       some  employers  can  aftord  to  pay  more 

than  others,  the  workers  desire  that  some 
form  of  profit  sharing  be  established  by  the  Arbitration 
Court.  (Otago  Daily  Times,  May  i8,  1907.)  But  the 
Court  has  repeatedly  stated  that  profit  sharing  could 
not  be  taken  as  the  basis  of  awards  on  the  ground  that  it 
would  involve  the  necessity  of  fixing  differential  rates  of 
wages,  which  would  lead  to  confusion,  would  be  unfair  to 
many  employers,  and  unsatisfactory  to  the  workers  them- 
selves. (Book  of  Awards,  vol.  7,  p.  50;  Broadhead, 
op.  cit.,  p.  61.) 


COMPULSORY  ARBITRATION  241 

In  practice,  the  awards  appear  to  be  based  on  two 
main  principles:    first  the  desire  and  intention  of  the 
Court   to  secure   a   living  wage   to  all 
able-bodied  workers;    second,  the  desire    Practical 
of  the  Court  to  make  a  workable  award ,    Principles 
that  is,  to  grant  as  much  as  possible  to 
the  workers  without  giving  them  more  than  the  industry 
can  stand.     In  doing  this  regard  must  be  had  to  the 
prosperity  of  a  given  industry  as  a  whole,  if  not  to  the 
profits  of  individual  employers.     It  is  usually  taken  for 
granted  that  no  reduction  will  be  made  in  the  customary 
wages  in  any  industry,  and,  in  times  of  depression,  this 
might  be  regarded  as  a  third  regulative  principle.    Again, 
it  is  the  custom  of  the  unions,  in  formulating  their  dis- 
putes, to  demand  more  than  they  expect  to  get,  knowing 
that,  in  the  worst  case,  they  will  lose  nothing.    So  fre- 
quently has  this  been  done  that  one  might  almost  lay 
down   a   fourth   regulative   principle,    the   principle   of 
splitting  the  difference. 

During  all  the  years  since  the  Act  was  passed,  the 
Government  has  been  in  the  hands  of  the  Liberal  Party, 
so  that  both  the  Government  and  the 
judges  have  been  disposed  to  do  what  The  Court  Fair 
they  could  for  the  working  class.  If  they  to  the  Workers 
have  not  done  more,  it  is  because  they 
could  not,  or  thought  they  could  not,  without  grave  in- 
jury to  the  industries  of  the  country.  Justice  Williams, 
the  first  President  of  the  Court,  said  in  a  letter  to  the 
London  Times: 

"  The  duty  of  the  Court  is  to  pronounce  such  an  award  as  will 
enable  the  particular  trade  to  be  carried  on,  and  not  to  impose  such 
conditions  as  would  make  it  better  for  the  employer  to  close  his 
works,  or  for  the  workmen  to  cease  working,  than  to  conform  to  them. 
(Broadhead,  op.  cit.,  p.  57.) 


242     STATE  SOCIALISM  IN  NEW  ZEALAND 

The  rigidity  of  system  which  is  characteristic  of  the 
railway  rates  seems  to  be  taking  possession  of  the  regula- 
tion of  wages  also.     When  the  awards 

en  ency  were  few  in  number  it  was  easy  to  make  a 

toward  Rigidity  .  ,.         , 

in  Wages  change  without  any  serious  disturbance 

to  industry,  but  now  that  they  are 
numerous  and  their  scope  has  been  widely  extended,  it  is 
difficult  to  make  a  change  in  one  without  making  many 
other  changes,  for  the  sake  of  adjusting  conditions  of 
labour  to  the  changing  conditions  of  business.  There  is, 
therefore,  a  temptation  to  abide  by  the  established  con- 
ditions.   As  Dr.  Clark  says: 

"  The   total   effect   is   to   make   the   condition   of   status  more 
rigid."     ("  The  Labour  Movement  in  Australiasia,"  p.  204.) 

Another  stumbling-block  in  the  way  of  advance  in 
wages  is   the   inefficient  or  marginal  or  no-profit  em- 
ployer, who,  hanging  on  the  ragged  edge 
The  Inefficient    of  ruin,  opposes  the  raising  of  wages  on 
Employer  the  ground  that  the  slightest  concession 

would  plunge  him  into  bankruptcy. 
His  protests  have  their  effect  on  the  Arbitration  Court, 
which  tries  to  do  justice  to  all  the  parties  and  fears  to 
make  any  change  for  fear  of  hurting  somebody.  But  the 
organized  workers,  caring  nothing  for  the  interests  of  any 
particular  employer,  demand  improved  conditions  of 
labour,  even  though  the  inefficient  employer  be  elimi- 
nated and  all  production  be  carried  on  by  a  few  capable 
employers  doing  business  on  a  large  scale  and  able  to  pay 
the  highest  wages. 

This  is  not  to  say  that  even  the  most  efficient  em- 
ployers   could     afford     to    pay    wages 
Limits  to  Rise  ,    .  r  ^1  -i- 

.    „,  ^  much  in  excess  01  those  now  prevaihng. 

in  Wages  11 

Dr.    Findlay    has    made    an    elaborate 

statistical  examination  of  this  matter,  and  arrives  at  the 


COMPULSORY  ARBITRATION  243 

conclusion  that  if  all  the  net  profits,  excluding  interest, 
of  all  the  employers  in  New  Zealand,  except  farmers, 
were  divided  among  all  their  employees,  the  yearly  in- 
crease in  wages  would  be  very  small.     He  says: 

"  Any  attempt  to  lay  violent  hands  upon  these  profits  would 
put  an  end  to  all  business  enterprise,  and  thus  destroy  the  very 
source  from  which  the  profits  are  drawn."  ("  Labour  and  the 
Arbitration  Act,"  1908,  p.  10.) 

From  such  a  statement  as  this  it  is  but  a  step  to  the 

position  that  wages  are  determined  chiefly  by  economic 

laws,  and  that  the  Arbitration  Court  can  cause,  at  most, 

very  slight  deviations  from  the  valuations  of  the  market. 

It  is  not  easy  to  show  that  compulsory  arbitration  has 

greatly  benefited  the  workers  of  the  Dominion.    Sweating 

has  been  abolished,  but  it  is  a  question 

whether  it  would  not  have  disappeared  in         „f"f  ^  ^    ^ 

Workers  not 
the  years  of  prosperity  without  the  help         ^,        Great 

of  the  Arbitration  Court,  Strikes  have 
been  prevented,  but  New  Zealand  never  sufTered  much 
from  strikes,  and  it  is  possible  that  the  workers  might 
have  gained  as  much,  or  more,  by  dealing  directly  with 
their  employers  as  by  the  mediation  of  the  Court.  As 
to  wages,  it  is  generally  admitted  that  they  have  not 
increased  more  tha'n  the  cost  of  living.  A  careful  investi- 
gation by  Mr.  von  Dadelszen,  the  Registrar  General, 
shows  that,  while  average  wages  increased  from  1895 
to  1907  in  the  ratio  of  84.8  to  104.9,  the  cost  of  food  in- 
creased in  the  ratio  of  84.3  to  103.3.  No  calculation  was 
attempted  for  clothing  or  rent.  (Year-Book,  1908,  p. 
539.)  A  similar  investigation  by  Dr.  J.  W.  Mcllraith, 
of  Canterbury  College,  shows  that  the  combined  prices 
of  45  commodities  increased  from  1895  to  1907  in  the 
ratio  of  93  to  104,  or  about  12  per  cent. 

It  is  a  common  opinion  in  New  Zealand  that  the 


244     STATE  SOCIALISM  IN  NEW  ZEALAND 

increase  in   the   cost  of    living    has    been   due    largely 

to     the     high     wages     and     favourable    conditions    of 

labour  fixed  by  the  Arbitration  Court, 

„.^  but    so     widespread     a    result    cannot 

Rises  '■ 

have  been  due  chiefly  to  local  causes. 
There  may  be,  and  probably  are,  cases  in  which 
the  awards  of  the  Court  have  compelled  manu- 
facturers to  raise  the  prices  of  their  products,  but  these 
are  probably  exceptional.  If  it  is  true  that  in  most  cases 
the  Court  has  awarded  wages  no  higher  than  the  indus- 
tries could  stand,  and  little,  if  any,  higher  than  the  labour 
market  would  have  effected  without  arbitration;  then  it  is 
probable  that  the  increased  cost  of  living  has  been  due 
chiefly  to  other  causes,  to  the  prosperity  of  the  Dominion, 
the  prosperity  of  the  world  in  general,  and  the  increased 
production  of  gold  during  the  period  under  discussion. 
Some  think  that  the  rise  in  prices  has  been  due  to  com- 
binations of  manufacturers  and  merchants;  but  while 
it  is  true  that  such  combinations  exist,  their  control 
over  prices  appears  to  be  very  slight.  (Parliamentary 
Debates,  vol.  145,  p.  212,  Speech  by  Mr.  Ell;  Clark, 
"  The  Labour  Movement  in  Australasia,"  p.  236; 
Scholefield,  "  New  Zealand  in  Evolution,"  p.  214.) 

Manufacturers  complain  that  the  awards  have  been 
so  favourable  to  the  workers  as  to  make  it  difficult  to  com- 
pete with  British  and  foreign  manufac- 
Cost  of  Produc-  ^yj.g^     ^^^  demand  that  either  the  arbi- 

in  Some  Lines  ^^^^ion  system  be  abolished  or  that  they 
be  given  increased  protection  by  in- 
creased duties  on  imported  goods.  It  is  claimed  that 
the  growth  of  manufactures  has  not  kept  pace  with 
the  growth  of  population  and  the  importation  of  manu- 
factures from  abroad.  (Broadhead,  op.  cit.,  pp.  136, 
219.)    There  is  reason  to  think  that  the  boot  trade,  fell 


COMPULSORY  ARBITRATION  245 

mongering,  and  fiaxmilling  have  been  hampered  by  the 

awards,  particularly  during  the  depression  of  1908-09, 

when  the  manufacturers  could  not  adjust  wages  to  the 

depressed  condition  of  the  market.     (Aves,  op.  cit.,  p. 

169;    Reeves,    "State    Experiments,"   vol.    2,    p.    147; 

Report  of   the   New   Zealand    Employers*    Federation, 

1908.)    Mr.  Broadhead  says: 

"  It  is  commonly  remarked  among  business  people  that  indus- 
trial enterprise  in  New  Zealand  has  been  checked  to  a  considerable  ex- 
tent by  the  labour  laws  of  the  country.  It  is  an  undoubted  fact  that 
many  people  having  money  to  invest  have  been  careful  to  avoid  any 
concern  in  which  labour  is  the  chief  item  in  expenditure.  It  may 
be  remarked,  too,  that  hardly  any  new  industry  has  been  started  for 
gOme  years."     (Broadhead,  op.  cit.,  p.  218.) 

Even  Mr.  Millar  spoke  in  the  same  strain  in  the 
House: 

"  There  is  a  limit  beyond  which  wages  cannot  go  in  this  country 
or  any  other  country.  The  limit  between  the  cost  of  the  imported  ar- 
ticle and  the  manufactured  article  is  so  small  now  that  the  least  thing 
can  turn  it  one  way  or  another."  (Parliamentary  Debates,  vol. 
145.  p.  184-) 

There  is  such  agreement  among  manufacturers  as  to 
the  efTect  of  compulsory  arbitration  in  increasing  the 
cost  of  production  that  their  statements 
cannot  be  lightly  dismissed,  especially  Growth  of 
as  many  unbiased  writers  concur  in  the  Manufactures 
opinion.  From  1896  to  1901,  there  was 
a  period  of  rapid  growth  of  manufacturing  establish- 
ments, many  of  them  new  to  New  Zealand,  and  in 
those  years  the  number  of  hands  employed  and  wages 
paid  increased  by  56  per  cent,  and  63  per  cent,  respec- 
tively. From  1 901  to  1906  the  growth  of  manufactures 
was  considerable,  though  not  so  great  as  during  the  for- 
mer period.  In  this  time  the  population  increased  by  15 
per  cent.,  the  total  imports  by  29  per  cent.,  the  number 
of  hands  employed  in  manufactures  by  22  per  cent.,  the 
wages  paid  by  33  per  cent.,  and  the  value  of  the  output  by 


246      STATE  SOCIALISM  IN  NEW  ZEALAND 

31  per  cent.  (Ycar-Book,  1909,  p.  405.)  However,  the 
growth  was  chiefly  in  manufactures  whicli  have  to  do 
with  the  preparation  of  raw  materials  for  market,  such  as 
meat  freezing  and  preserving,  butter  and  cheese  factories, 
saw-mil!s  and  flax-mills.  Most  of  the  other  manufactur- 
ing establishments  show  a  moderate  improvement,  such 
as  printing  establishments,  grain  mills,  tailoring,  furni- 
ture and  cabinet-making,  coach  building,  brick  works, 
agricultural  implement  works,  and  sugar-boiling.  Others, 
including  woolen  mills,  show  a  very  slight  improvement, 
while  several  important  industries,  including  tanning 
and  fell-mongering,  iron  and  brass  foundries,  clothing  and 
boot  and  shoe  factories  and  breweries  show  a  falling  off. 
These  statements  refer  only  to  the  value  of  the  output, 
as  shown  in  the  Reports  of  the  Census.  Statistics  relat- 
ing to  the  profits  of  manufacturing,  as 
Profits  of  given  in  the  Reports  of  the  Census  for 

Manufacturing  190 1  and  1 906,  in  so  far  as  they  are  to  be 
relied  on,  show  that  profits  in  general 
are  not  at  all  high.  In  1901,  the  total  value  of  manu- 
factures was  £17,853,113,  while  the  combined  value  of 
the  materials  used  and  the  wages  paid  was  £11,052,417. 
In  1906,  the  value  of  the  manufactures  was  £23,444,235; 
the  value  of  materials,  £13,163,692;  the  amount  paid 
in  wages,  £4,457,619;  and  the  combined  value  of  ma- 
terials used  and  wages  paid,  £17,615,311.  (Year-Book, 
1909,  p.  419.)  According  to  these  figures,  the  gross  profit 
in  1906  was  less  than  in  1901,  although  a  much  larger 
business  was  done  in  the  latter  3''ear  than  in  the  former. 
Also,  if  one  were  to  deduct  interest  and  other  items  of 
cost,  the  net  profits  of  manufacturing  enterprise  would 
appear  to  be  quite  low.  This  conclusion  is  confirmed 
by  the  income-tax  statistics,  which  show  that,  in  the 
year  1907-08,  the  gross  profits  of  traders,  manufacturers. 


COMPULSORY   ARBITRATION  247 

and  business  men  were  £7,775,579,  upon  a  capital  of  at 
least  £40,000,000.  This,  again,  does  not  seem  to  be  a  high 
rate  of  gross  profit,  considering  the  risks  undertaken  by 
business  men.  The  profits,  however,  of  merchants,  are 
probably  higher  than  those  of  manufacturers,  if  we 
except  meat-freezing  and  kindred  establishments.  (Find- 
lay,  Labour  and  the  Arbitration  Act,  1909.) 

Unquestionably,  manufacturers,  with  the  exception 
of  the  great  industries  which  work  up  raw  materials  for 
market,  are  not  doing  any  too  well;  but 
it  is  not  likely  that  compulsory  arbitra-    High  Wages  in 
tion  is  the  chief  cause  of  this.    The  high    New    Country 
wages  which  manufacturers  have  to  pay 
are  due  chiefly  to  industrial  conditions  which  always  pre- 
vail in  a  new,  thinly  populated  country  with  great  nat- 
ural resources  awaiting  development.     The  more  pros- 
perous the  agricultural  population,  the  higher  wages  must 
be,  and  the  more  difficult  it  is  for  manufacturers  to  find 
workers.     This  is  particularly  true  of  women  workers, 
for  whom  there  is  an  active  demand  in  the  matrimonial 
market. 

New  Zealand  manufacturers  produce  on  a  relatively 
small  scale,  find  it  hard  to  compete  with  imported  goods 
produced  under  totally  different  condi- 
tions,  and    are   inclined    to   throw   the    ,    f^   ^    J     ~ 

.       /^  /-  lation  on  Cost 

blame  upon  the  Arbitration  Court.    L  er-    ^^  Production 

tainly,  the  Court  has  done  nothing  to 
lower  the  cost  of  production,  except  in  the  way  of  pre- 
venting strikes,  and  has  probably  increased  it  somewhat, 
not  so  much  by  fixing  minimum  wages  as  by  granting, 
in  many  cases,  limitation  of  apprentices,  prohibition  of 
piece-work,  and  other  restrictions.    As  Dr.  Clark  says: 

"All  regulations  restricting  the  freedom  of  employers  in  con- 
ducting their  business  probably  add  to  the  cost  of  production." 
("  The  Labour  Movement  in  Australasia,"  p.  233.) 


248     STATE  SOCIALISM  IN  NEW  ZEALAND 

Many  employers  believe  that  the  cost  of  production 
has  been  increased  by  a  decline  in  the  efficiency  of  labour 
due  to  the  fixing  of  high  minimum  wages, 
Efficiency  of         which  discourages  capable  men  from  do- 
Labour  ing  their  best  work.     Mr.  G.  T.  Booth 
says: 

"  I  am  quite  sure  that  the  arbitration  system  has  resulted  in  a 
loss  of  industrial  efficiency  far  greater  than  ever  resulted  from 
strikes." 

Mr.  Booth  asserts  that  the  annual  output  per  man 
in  a  certain  industry  (engineering)  has  fallen  from  £254 
in  1901,  to  £224  in  1906;  but,  as  Mr.  Ell  pointed  out, 
this  may  have  been  due  to  other  causes.  (Parliamentary 
Debates,  vol.  145,  p.  210;  Annual  Report  of  the  Canter- 
bury Employers'  Association,  1908.)  There  is  much  dif- 
ference of  opinion  about  this  matter.  In  reply  to  one  of 
the  questions  sent  out  by  Mr.  Aves,  6  employers  and  13 
employees  said  that  efficiency  had  been  increased ;  while 
29  employers  and  i  employee  said  that  it  had  been  de- 
creased. (Aves,  op.  cit.,  pp.  109,  180).  It  seems  prob- 
able that  the  "  go  easy  "  way  of  working  has  gained 
ground  in  New  Zealand  in  recent  years,  but  the  same 
phenomenon  is  observed  in  other  countries,  and  the 
tendency  of  trade  unionism  everywhere  seems  to  be 
toward  a  levelling  down  which  cannot  but  discourage 
a  high  degree  of  industrial  efficiency. 

The  employers,  at  best,  give  but  a  grudging  approval 
to  the  Arbitration  Act.     The  farmers,  as  a  class,  are 

decidedly  opposed  to  it.  (Evening  Post, 
Opinions  of  Wellington,  June  30,  1 908.)  Mr.  Massey, 

Employers  the  leader  of  the  Oppositon,  said  in  the 

House  that  he  was  opposed  to  compul- 
sory arbitration.  (Parliamentary  Debates,  vol.  145, 
p.  195.)  Mr.  William  Scott,  Secretary  of  the  Otago 
Employers'  Association,  says: 


COMPULSORY  ARBITRATION  249 

"  Thirteen  years'  experience  as  an  employers'  advocate  before  the 
Court  compels  me  to  admit  that  any  method  of  regulating  wages  by 
Act  of  Parliament  must  in  the  end  result  in  failure."  (Scott,  Address 
before  the  New  Zealand  Employers'  Federation,  August  28,  1907.) 

Mr.  Broadhead  very  fairly  sums  up  the  attitude  of 
the  employers,  thus: 

"  Some,  for  business  or  other  reasons,  decline  to  express  an 
opinion  on  the  Act,  but  say  that  the  Act  has  been  diverted  from  its 
original  purposes;  others,  and  these,  I  think,  form  a  large  propor- 
tion of  the  employers  in  the  Colony,  have  little  or  nothing  to  say  in 
favour  of  the  Act,  and  express  the  opinion  that  it  would  have  been 
better  for  the  industries  of  the  Colony  if  it  had  never  existed," 
(Broadhead,  State  Regulation,  p.  208.) 

It  should  be  remembered,  however,  that  these 
opinions  were  expressed  when  the  employers  were 
alarmed  and  disgusted  with  the  Act  because  of  several 
important  strikes.  Since  that  time  they  have  come  to 
realize  that  they  might  have  lost  more  by  strikes  than 
they  have  ever  lost  by  arbitration;  and,  since  the 
workers  have  been  dissatisfied,  the  employers  are  more 
disposed  to  stand  by  the  Act,  or  to  maintain  a  neutral 
attitude,  waiting  to  see  what  the  workingmen  will  do. 


CHAPTER    XV 

STRIKES 

The  dissatisfaction  of  the  employers  was  not  the 
chief  of  the  causes  which  brought  about  the  Amendment 
Act  of  1908.  The  original  Act  and  most 
The  Workers  of  the  amendments  were  passed  for  the 
Disappointed  benefit  of  the  working  class,  and  had  they 
been  satisfied  there  would  have  been  no 
material  change.  The  workers  expected  great  benefits 
from  the  Act,  and  for  some  years  they  were  well  satis- 
fied with  the  results.  Travellers  from  abroad,  like  Mr. 
Henry  D.  Lloyd,  found  almost  everybody  loud  in  praise 
of  the  Act,  and  only  a  few  critics,  like  Mr.  John  Mac- 
Gregor,  prophesying  against  it.  When  M.  Felicien 
Challaye  visited  New  Zealand  in  the  year  1900,  he  at- 
tended a  meeting  of  the  Wellington  Trades  and  Labour 
Council,  and  got  the  members  to  express  individually 
their  opinion  of  the  Act.  One  after  another  they  recited 
the  advantages  of  compulsory  arbitration:  higher  wages, 
shorter  hours,  steady  employment,  and  other  benefits. 
"  It  has  put  thousands  of  pounds  in  our  pockets,"  said 
one  member.    "  It  is  a  part  of  our  religion,"  said  another. 

But  as  the  early  awards  expired  and  fresh  disputes 
arose,  the  Court  frequently  declined  to  make  substantial 
concessions  to  the  workers,  who  soon  began  to  express 
their  dissatisfaction.  According  to  Mr.  Broadhead,  the 
first  protest  against  an  award  was  made  at  Christchurch, 
in  1 901,  when  the  Christchurch  Operative  Bootmakers' 
Society  unanimously  passed  a  resolution  declaring  that 
the  recent  award  in  their  trade  was  "  against  the  weight 

250 


STRIKES  251 

of  evidence."  In  August  of  the  same  year  the  Canterbury 
Trades  and  Labour  Council  condemned  the  action  of 
the  Court  in  refusing  to  make  a  complete  award  in  the 
wool-scouring  and  fellmongering  trades.  (Broadhead, 
op.  cit.,  p.  164;   Book  of  Awards,  vol.  3,  p.  463.) 

From  this  time  complaints  against  the  Court  became 
more  frequent  and  bitter,  not  because  wages  were  re- 
duced, but  because  they  were  not  in- 
creased,   and    because    other    demands        ^*V^  ^*"  ^ 
,      ^  ,.         .  r       •  against  the 

were  not  granted.    Great  dissatisfaction      court 

was  aroused  because  of  the  Dunedin 
Seamen's  Award  of  February,  1906,  when  the  Court  re- 
fused to  grant  the  demands  of  the  seamen,  on  the  ground 
that  no  substantial  difference  in  circumstances  had 
arisen  since  the  last  award.  The  workers'  representative 
dissented  from  this  decision,  which  aroused  great  indig- 
nation among  all  classes  of  workers.  The  secretary  of  the 
Seamen's  Union  is  reported  as  saying: 

"  The  seamen  have  given  so-called  arbitration  a  very  fair  trial, 
extending  over  about  ten  years.    The  most  cherished  principles  that 
they  are  striving  for  have  been  denied  us  by  the  Court,  and  improve 
ments  in  the  seamen's  condition  are  evidently  not  obtainable  under 
the  present  system  of  arbitration." 

Numerous  resolutions  were  passed  by  labour  organi- 
zations condemning  the  action  of  the  Court,  and  the 
Australasian  Federated  Seamen's  Union  of  Wellington 
passed  a  resolution  recommending  that  a  ballot  be  taken 
of  all  the  members  in  New  Zealand  on  the  question 
whether  the  registration  of  the  Union  under  the  Act 
should  not  be  cancelled.  The  seamen  also  considered 
the  advisability  of  striking,  thus  reviving  echoes  of  the 
maritime  strike  of  1890. 

At  the  Meeting  of  the  Trades  and  Labour  Council  of 
New  Zealand,  at  Christchurch,  on  April  19,  1906,  Mr. 
D.  McLaren  moved : 


252     STATE  SOCIALISM  IN  NEW  ZEALAND 

"  That   this  Conference  has  no  confidence  in  the  Arbitration 
Court  as  at  present  constituted," 

but  the  motion  was  lost  by  a  vote  of 
C  it'  •    d  ^^  ^^5"     (Report  of  the  Annual  Confer- 

ence of  the  Trades  and  Labour  Councils 
of  New  Zealand,  1906.)  The  motion  was  a  veiled  attack 
on  Mr.  Justice  Chapman,  the  President  of  the  Court. 
The  term  of  Mr.  Justice  Chapman  expired  at  the  end  of 
the  year,  when,  at  his  own  request,  he  was  transferred 
to  the  regular  work  of  the  Supreme  Court.  He  was  suc- 
ceeded by  Mr.  W.  A.  Sim,  of  Dunedin,  but  with  no  better 
results  from  the  workers'  point  of  view.  Some  have  gone 
so  far  as  to  suggest  that  the  Judge  of  the  Arbitration 
Court  should  be  elected  by  the  people,  in  the  hope  that 
the  unions  might  control  the  election,  but  this  would  be 
at  variance  with  all  British  traditions  and  could  not  be 
brought  about. 

The  dissatisfaction  finally  came  to  a  head  n  a 
series  of  strikes  beginning  with  that  of  the  tramiway 
employees  in  Auckland,  on  November  14,  1906. 
Before  this  time  there  had  been  a  few 
The  First  Strike  unimportant  strikes  (Reeves,  "  State 
Experiments,"  vol.  2,  p.  139),  and  the 
Auckland  strike  was  not  important  except  as  indicating 
the  changing  attitude  of  the  workers  toward  the  Act. 
The  conductors  and  motormen,  222  in  number,  left 
their  cars  about  five  o'clock  on  the  afternoon  of  Novem- 
ber 14,  and  remained  out  until  about  eight  o'clock, 
when  the  Company  acceeded  to  their  demands.  The 
men's  grievance  had  to  do  with  the  summary  dismissal 
of  a  conductor  for  alleged  misconduct,  and  the  dismissal 
of  ten  other  employees  for  refusing  to  teach  "  learners." 
Six  months  later  the  Company  was  brought  before  the 
Court  and  fined  £5  and  costs  for  having  dismissed  the 


STRIKES  253 

men  without  the  fourteen  days  notice  required  by  the 

award.     Of  all  the  men  who  went  on  strike,  only  two 

were  brought  before  the  Court,  and  these  were  fined  £1 

each,  without  costs.     The  Court  was  lenient  because  it 

did  not  consider  that  the  strike  had  been  preconcerted. 

The  next  strike  began  on  February  12,  1907,  when 

the     slaughtermen    employed    by     two     meat-freezing 

establisliments    near    Wellington     struck     for    higher 

wages,  demanding  255.  per  100  sheep  or 

lambs  slaughtered,   instead   of   the  old      „i     ^i.^ 

°  Slaughtermen 

rate  of  20s.  The  trouble  was  settled  by  a 
compromise  at  235.  The  Gear  Company  resumed  work 
on  February  18,  and  the  Wellington  Meat  Company  on 
the  following  day.  Encouraged  by  this  success,  the 
slaughtermen  in  various  parts  demanded  higher  wages 
and  went  on  strike  when  these  were  refused.  In  every 
case  a  compromise  vv^as  effected  at  235.  It  was  not  until 
March  16  that  the  strikes  came  to  an  end.  Presently, 
the  men  were  cited  to  appear  before  the  Arbitration  Court 
and  fines  were  imposed.  The  original  strikers  escaped  on 
a  technicality;  but  all  the  rest,  266  in  number,  were 
condemned  to  pay  £5  apiece,  the  fines  amounting  to 
£1,330  in  all.  Up  to  March  31,  1909,  £776  was  re- 
covered, leaving  £553  unpaid,  since  the  delinquents 
could  not  be  found,  some  having  gone  back  to  Australia 
and  others  being  scattered  in  different  parts  of  the 
Colony.  Since  that  time  orders  of  attachment  of  wages 
were  served  on  those  who  had  ignored  the  final  notice, 
and  by  this  means  about  £100  more  were  secured.  (An- 
nual Report  of  the  Department  of  Labour,  1909,  p.  25.) 

Early  in  the  year  1908,  a  strike  occurred  among  the 
coal  miners  of  the  West  Coast  which  continued  for 
eleven  weeks.  Seven  miners  had  been  dismissed  by 
the  manager  of  the  Blackball  Company;  whereupon  all 


254     STATE  SOCIALISM  IN  NEW  ZEALAND 

the  colliers,  120  in  number,  went  on  strike  on  Febru- 
ary 27.  The  men  asserted  that  the  miners  dismissed 
were  being  victimized  because  they  were 
Strike  of  Coal  ^^^j^.^  unionists  and  socialists.  The 
jVl incrs  3t 
Blackball  Company  was  willing  to  compromise  and 

offered  to  reinstate  the  men,  but  the 
miners  refused  to  return  to  work  unless  some  arrange- 
ment were  nicide  to  prevent  a  similar  occurrence  in  the 
future,  and  suggested  that  when  men  were  to  be 
dismissed  they  should  be  selected  by  ballot.  They 
also  demanded  thirty  minutes  lunch  time  and  a 
strict  enforcement  of  the  "  bank  to  bank  "  principle, 
according  to  which  the  miners  were  to  be  underground 
only  eight  hours  from  bank  to  bank,  that  is,  from  sur- 
face to  surface. 

The  Department  of  Labour  attempted  to  effect  a 
settlement  of  the  trouble,  but  without  success,  where- 
upon the   Union  was  cited  before   the 
The  Union  Arbitration  Court  and  a  fine  of  £75  was 

Recalcitrant  imposed.  The  strike  continued,  and  the 
Union  went  so  far  as  to  refuse  to  pay  the 
fine,  alleging  that  it  had  no  funds.  In  this  position  the 
Union  was  generally  condemned  by  public  opinion,  but 
supported  by  a  number  of  unions  by  resolutions  of  sym- 
pathy and  gifts  of  money.  Finally,  the  Arbitration  Court 
decided  to  proceed  against  the  men  individually  for  their 
share  of  the  fine.  The  whole  of  the  fine,  together  with  the 
costs  of  collection,  amounting  to  over  £147,  was  recovered 
by  means  of  attachment  orders  under  the  Wages  Attach- 
ment Act,  1895.  According  to  a  recent  decision  of  the 
Court  of  Appeals,  the  men  could  have  been  imprisoned, 
if  they  had  refused  to  pay,  for  a  maximum  term  of  one 
year;  but  it  was  not  necessary  to  do  this  and  public  opin- 
ion was  not  in  favour  of  imprisonment  for  this  offence. 


STRIKES  255 

The  strike  was  ended  about  the  middle  of  May,  when  the 
Company  conceded  practically  everything  that  the  men 
had  demanded.  {The  Evening  Post,  Wellington,  Febru- 
ary to  May,  1908;  Annual  Report  of  the  Department  of 
Labour,  1909,  p.  26.) 

On  May  21,  1908,  a  second  strike  of  motormen  and 
conductors  occurred  at  Auckland  and  lasted  until  Mon- 
day, May  25.  The  cause  of  the  trouble 
was  similar  to  that  of  the  strike  of  No-  A  Special  Board 
vember,  1906.  Mr.  Edward  Tregear,  of  Conciliation 
the  Secretary  for  Labour,  and  Mr.  A.  M. 
Myers,  the  Mayor  of  Auckland,  succeeded  in  inducing 
the  parties  to  refer  all  the  questions  to  a  special  board  of 
conciliation  under  Sections  51  and  52  of  the  Compilation 
Act,  1905.  This  is  the  only  case  in  which  these  sections 
have  been  applied  to  the  settlement  of  a  dispute.  The 
finding  was  delivered  on  July  25,  and  was  largely  favour- 
able to  the  employees.  Action  was  taken  by  the  Depart- 
ment against  the  Union  for  bringing  about  a  strike,  and  a 
fine  of  £60  was  imposed,  which  was  paid  within  twenty- 
five  days.  (Report  of  the  Department  of  Labour,  1909, 
p.  26.)  Later  in  the  year,  when  the  Amendment  Act 
was  passed,  it  provided  for  Councils  of  Conciliation  simi- 
lar to  the  special  board  used  to  settle  this  dispute. 

A  strike  of  bakers  began  in  Wellington  on  June  29, 
1908,  shortly  after  the  Court  had  made  an  award  grant- 
ing an  increase  of  wages,  but  not  so  much 
as   they  desired.      Although    the   strike  Futile  Strike 
lasted  seventy-six  days,  it  was  a  com-  of  Bakers 
plete  fiasco,  causing  no  shortage  of  bread, 
and  the  bakers  were  glad  to  return  to  work  on  the  terms 
of  the  award.    The  penalty  in  this  case  was  £100,  which 
was  paid  within  one  week,  as  directed.    Action  was  taken 
against  four  others  for  aiding  and  abetting  the  strike. 


256     STATE  SOCIALISM  IN  NEW  ZEALAND 

The  Court  ruled  that  the  provisions  of  the  Act  did  not 
cover  such  cases,  and  held  "  that  the  strike  was  complete 
on  the  day  that  the  strike  took  place,  and  that  it  was  im- 
possible for  the  respondents  to  be  guilty  of  the  said  offen- 
ces by  anything  which  they  did  after  the  date  the  strike 
took  place."  (Report  of  the  Department  of  Labour, 
1909,  p.  26.)  This  defect  in  the  law  was  remedied  by  the 
Amendment  Act  of  1908,  which  provided  penalties  for 
aiding  and  abetting  an  unlawful  strike  or  lock-out,  and 
made  a  strike  a  continuing  offence. 

On  September  16,  1908,  the  Hon.  J.  A.  Millar,  the 
Minister  of  Labour,  presented  to  the  House  a  complete 
list  of  the  strikes  which  had  occurred  since  November 
14,  1906.     He  said: 

List  of  Strikes  •  ^he  total  number  of  strikes  is  23,  and  the  total 
number  of  strikers  1,117.  The  men  rendered  idle 
were  2,389;  the  duration  of  strikes  was  316  days;  and  the  loss  of 
wages  to  workmen  amounted  to  £17,667.  The  approximate  loss  to 
employers  was  £15,688.  This  will  give  honourable  members  a  fair 
idea  of  what  the  strikes  cost  the  country;  and  this  is,  after  all,  tipon  a 
very  small  scale,  as  will  be  seen."  (Parliamentary  Debates,  vol. 
145.   187.) 

Trouble  in  the  mining  industry  arose  again  because 
of  the  new  Workers'  Compensation  Act  of  1908,  which 

was  to  go  in  force  on  January  i,  1909. 
Pneumoconiosis  The  Act  provided  for  employers'  liability, 
Deadlock  not  only  in  case  of  accident,  as  formerly, 

but  for  some  diseases  characteristic  of  cer- 
tain industries,  including  pneumoconiosis,  or  miners' 
consumption.  {Evening  Post,  Wellington,  December 
30,  1908.)  In  order  to  protect  themselves  and  the  em- 
ployers against  the  additional  risk,  the  insurance  com- 
panies required  that  the  workmen  concerned  undergo  a 
medical  examination  to  show  that  they  had  not  already 
contracted  pneumoconiosis,  or  any  other  of  the  diseases 
mentioned  in  the  Act.     This  the  miners  refused  to  do; 


STRIKES  257 

with  the  result  that  most  of  the  coal  mines  in  the  Inan- 
gahua  district  were  closed  pending  a  settlement  of  the 
difficulty.  The  trouble  was  neither  a  strike  nor  a  lock- 
out, but  a  deadlock,  due  to  a  very  peculiar  situation 
created  by  the  Act.  Although  a  number  of  gold  miners 
had  submitted  to  examination,  the  Waihi  Miners'  and 
Workers'  Union,  representing  about  1,700  men,  on  Janu- 
ary 7  passed  the  following  resolution: 

"  That  this  Union  pledges  itself  not  to  submit  to  a  medical  test. 
That  we  endorse  the  action  of  those  who  refused  to  submit  to  a  test, 
and  are  prepared  to  come  out  in  a  body  in  their  support  should  they 
not  be  reinstated  by  next  Monday."  {Evening  Post,  Wellington, 
January  8,  1909.) 

The  situation  was  very  grave.  The  Government 
Insurance  Department  had  very  properly  refused  to  as- 
sume   the   extra   risk    without   medical 

examination,  and  the  Government  had         ^ 

,   ,         ,  ,  ,         .  r     ,  Government 

stood  by  them;  but  on  hearmg  01   the         Yields 

action  of  the  Waihi  Union,  the  Govern- 
ment made  a  complete  change  of  front,  authorized  the 
Insurance  Department  to  issue  policies  without  examina- 
tion, and  agreed  to  indemnify  the  Department  against 
loss,  pending  further  legislation.  {The  Evening  Post, 
January  9,  1909.) 

This  extraordinary  concession  was  received  with 
astonishment  by  the  public,  especially  by  employers  and 
insurance  men,  but  it  prevented  a  serious  strike,  and  the 
trouble  about  pneumoconiosis  was  ultimately  settled  by 
the  employers*  agreeing  to  take  their  own  risks  against  the 
disease  or  accept  the  Insurance  Department's  offer  to 
insure  their  workers  at  an  Increased  rate  without  medical 
examination.  (Annual  Report  of  the  Canterbury  Em- 
ployers' Association,  1909,  p.  11.)  The  whole  affair  illus- 
trates the  difficulty  of  applying  business  principles  to  an 
enterprise  carried  on  by  a  democratic  government. 


258     STATE  SOCIALISM  IN  NEW  ZEALAND 

The  pneumoconiosis  deadlock  resulted  in  a  strike  of 
the  coal  miners  at  Huntly,  who  wished  to  have  four  so- 
called  "  blacklegs  "  degraded  for  having  submitted  to  a 
medical  examination;  but  the  miners  were  clearly  in  the 
wrong,  accepted  a  compromise  proposed  by  the  Company, 
and  went  back  to  work  on  January  27. 

A  trifling  strike  occurred  on  January  15,  1910,  when 
seventeen  fellmongers  employed  by  the  Hawke's  Bay 
Freezing  Company  at  Paki  Paki  discontinued  work  for 
one  hour  because  the  Company  would  not  allow  them 
ten  minutes,  morning  and  afternoon,  for  a  "  smoke-oh," 
which  was  not  provided  for  in  the  award.  The  men's 
demand  was  granted,  but  the  Department  took  action 
against  the  men  individually  before  Mr.  S.  E.  McCarthy, 
Stipendiary  Magistrate,  who  inflicted  penalties  of  £i 
each  against  the  respondents.  (Annual  Report  of  the 
Department  of  Labour,  1909,  p.  26.)  From  this  time 
until  November,  1909,  there  were  practically  no  strikes. 

Possibly,  this  was  due  to  the  industrial  depression, 
possibly  to  the  desire  of  the  workers  to  give  the  Amend- 
ment Act  of  1908  a  fair  trial,  although 
Strike  of  they  did  not  expect  much  benefit  from  it. 

State  Employees  In  November,  trouble  arose  in  the  State 
colliery  at  Point  Elizabeth,  near  Grey- 
mouth.  The  men  wanted  the  Department  to  do  the 
trucking,  and  the  Department  desired  to  make  a  reduc- 
tion in  the  hewing  rate  to  compensate  it  for  the  extra 
expense  of  trucking.  The  Manager  and  the  Union  could 
not  come  to  terms,  the  Union's  executive  called  a  strike 
on  November  23,  and  all  the  miners,  over  400  in  number, 
quit  work.  It  was  an  odd  coincidence  that  the  strike 
occurred  soon  after  the  beginning  of  a  great  strike  of  coal 
miners  at  Newcastle  in  New  South  Wales,  when  some 
people  were  demanding  the  nationalization  of  the  col- 


STRIKES  259 

Heries  as  the  best  way  of  preventing  strikes.  On  this 
point  The  Press,  of  Christchurch,  an  Opposition  paper, 
said  : 

"  Governments,  especially  as  we  know  them  in  New  Zealand, 
are,  indeed,  much  more  squeezable  by  labour  agitators  than  are 
private  employers,  and  in  this  fact  lies  much  of  the  danger  to  the 
taxpayer  of  State  incursions  into  the  domain  of  private  enterprise." 

Another  interesting  fact  is  that  the  miners  were  en- 
couraged in  their  demands  by  the  statements  of  the 
Department  that  the  State  collieries  were  earning  large 
profits,  although  some  financial  critics  deny  that  any  such 
profits  were  earned.  {The  Star,  Christchurch,  November 
24,  1909.)     One  of  the  miners  is  reported  as  saying: 

"  We  are  not  going  to  sweat  ourselves  to  pay  fat  salaries  to  Sir 
Joseph  Ward  and  the  big  bugs.  The  profits  of  the  State  mine  should 
go  to  the  men  who  dig  the  coal."  {The  Evening  Post,  November 
27,  1909.) 

After  much  discussion,  the  Government  was  con- 
vinced that  the  miners  had  substantial  grievances;  they 
receded  from  the  position  previously  tak- 
en; and  the  miners'  representatives  Compromise 
received  the  assurance  that  the  Minister  Efifected 
of  Mines,  the  Hon.  Roderick  McKenzie, 
would  visit  Point  Elizabeth  after  the  session  of  Parlia- 
ment and  would  give  the  men  conditions  not  less  favour- 
able than  those  obtaining  in  other  mines.  The  miners 
resumed  work  on  Monday,  December  13,  with  the 
feeling  that  they  had  won  a  great  victory.  According  to 
agreement,  Mr.  McKenzie  paid  a  visit  to  the  West  Coast 
and  effected  a  compromise  on  January  5,  1910,  The 
miners  were  not  prosecuted  for  striking;  for  they  were  no 
longer  under  the  jurisdiction  of  the  Arbitration  Court, 
since  they  had  allowed  their  registration  to  be  cancelled 
by  the  Department  of  Labour  for  failing  to  send  in  the 
annual  returns  required  by  law. 


260     STATE  SOCIALISM  IN  NEW  ZEALAND 

On  the  day  after  this  settlement  was  effected,  the 

WelHngton  Slaughtermen's  Union  sent  a  notice  to  the 

Gear  Company  and  the  Wellington  Meat 

Slaughtermen      g^port  Company  that  they  would  go  on 
give  Notice  of  ^      j  j  o 

Intended  Strike  strike  in  14  deiys  if  their  employers  would 
not  grant  them  a  rate  of  255.  a  hundred 
for  all  sheep  and  lambs  not  otherwise  specified,  besides 
other  concessions.  The  agreement  entered  into  after  the 
strike  of  1907  had  expired  on  June  10,  1909,  after  which  it 
continued  in  force  while  negotiations  for  a  new  agreement 
were  pending.  The  employers,  wishing  to  have  the  dis- 
pute heard  by  the  Conciliation  Commissioner,  Mr.  P. 
Hally,  according  to  the  new  law,  drew  up  a  statement 
and  appointed  assessors;  but  the  Union  neglected  to 
appoint  assessors,  preferring  to  settle  directly  with  the 
employers.  On  January  14  and  15,  a  conference  was  held 
at  which  Mr.  Hally  presided,  though  not  officially  as 
Commissioner.  The  conference  arrived  at  terms  of 
peace,  by  which  the  slaughtermen  obtained  practically 
all  that  they  had  demanded.  The  agreement  was  to  go 
to  the  Arbitration  Court  to  be  constituted  an  award  for 
three  years.     {Evening  Post,  January  15,  1910.) 

The  strikes  of  1907  and  1908  caused  a  widespread 
opinion    among    employers    and     the    general     public 
that  the  Act  should  be  amended,  chiefly 
The  Act  for  the  sake  of  preventing  strikes.    The 

Amended  labourers,  as  a  class,  were  not  enthusi- 

astic about  the  matter,  since  the  proposed 
amendments  were  designed  to  compel  them  to  obey  the 
law  rather  than  to  bring  them  any  additional  benefits. 
A  bill  was  brought  down  by  the  Minister  of  Labour  in 
the  session  of  1907,  but  received  little  attention.  In  the 
session  of  1908  the  Minister  again  brought  forward  a  bill, 
which  was  actively  debated.       Finally,  the    Industrial 


STRIKES  261 

Conciliation  and  Arbitration  Amendment  Act,  1908,  was 
passed,  and  went  into  effect  on  January  i,  1909.  The 
following  is  a  brief  summary  of  the  leading  provisions  of 
the  new  law:  (Summary  of  the  Industrial  Conciliation 
and  Arbitration  Amendment  Act,  1908,  by  Henry  Broad- 
head.) 

The  Act  gives  elaborate  definitions  of  the  terms 
"  strike  "  and  "  lock-out,"  stress  being  laid  in  both  cases 

on  the  "  intention  "  of  the  workers  or 

1  •  •  ,    -1  11      Chief  Provisions 

employers  m  causme  a  strike  or  a  lock-    ,    ,      . 

°  of  the  Amend- 

°"^-  ment  Act,  1908 

The    terms    "  unlawful    strike "    or 

"  unlawful  lock-out  "  mean  a  strike  or  a  lock-out  by 
parties  bound  by  an  award  or  industrial  agreement  in  the 
industry  affected.  For  example,  the  strike  of  the  miners 
in  the  State  colliery  in  November,  1909,  was  not  an 
"  unlawful  strike,"  for  the  registration  of  the  union 
had  been  cancelled  and  there  was  no  award  or  agreement 
in  force. 

Every  worker  who  is  a  party  to  an  unlawful  strike  is 
liable  to  a  penalty  not  exceeding  £10;  and  every  em- 
ployer who  is  a  party  to  an  unlawful  lock-out  is  liable  to  a 
penalty  not  exceeding  £500. 

The  maximum  penalty  for  aiding  or  abetting  an 
unlawful  strike  or  lock-out  is,  in  the  case  of  a  worker, 
£10;  and  in  the  case  of  an  industrial  union,  trade  union 
or  employer,  or  any  person  other  than  a  worker,  £200. 
No  penalties  are  provided  for  other  than  "  unlawful  " 
strikes  or  lock-outs. 

Special  penalties  are  to  be  inflicted  when  strikes  or 
lockouts  occur  in  certain  specified  industries:  the  manu- 
facture or  supply  of  coal  gas;  the  production  or  supply  of 
electricity  for  light  or  power;  the  supply  of  water  to  the 
inhabitants  of  any  borough  or  other  place;  the  slaughter- 


262     STATE  SOCIALISM  IN  NEW  ZEALAND 

ing  or  supply  of  meat  for  domestic  purposes;  the  supply 
of  milk  for  domestic  consumption;  the  sale  or  delivery  of 
coal ;  the  working  of  any  ferry,  tramway,  or  railway  used 
for  the  public  carriage  of  goods  or  passengers.  These 
penalties  are  to  be  inflicted  if  a  worker  strikes  without 
having  given  not  less  than  14  days'  notice  to  his  em- 
ployer, or  if  an  employer  fails  to  give  a  similar  notice  to 
his  employees  of  his  intention  to  lock-out.  It  was  to  es- 
cape these  special  penalties  that  the  Slaughtermen's 
Union  gave  notice  to  their  employers,  on  January  6, 
1 910,  of  their  intention  to  strike  at  the  expiration  of  14 
days,  unless  their  demands  were  granted.  Strange  to 
say,  special  notice  is  not  required  in  the  case  of  a  strike 
or  a  lock-out  in  the  mining  of  coal,  but  only  in  the  sale  or 
delivery  of  it. 

The  judgment  in  any  action  is  enforceable  in   the 
same  manner  as  a  judgment  for  debt  or  damages  in  the 
magistrate's   court.      The   surplus   of   a 
Attachment         worker's  wages  may  be  attached  above 
of  Wages  the  sum  of  £2  a  week  in  the  case  of  a 

worker  who  is  married,  or  who  is  a 
widower  or  widow  with  children,  or  above  the  sum  of  £i 
a  week  in  the  case  of  any  other  worker.  Imprisonment 
for  refusal  to  pay  fines  is  abolished. 

The  Boards  of  Conciliation  are  abolished,  and  Coun- 
cils of  Conciliation  take  their  place.  The  only  per- 
manent members  of  these  Councils  are 
Councils  of  the  Commissioners  of  Conciliation,  at 
Conciliation  present  three  in  number,  who  are  ap- 
pointed by  the  Governor.  In  case  of  a 
dispute,  one  of  the  Commissioners  goes  to  the  scene  and 
tries  to  effect  a  settlement  in  an  informal  manner.  If 
unsuccessful  in  this,  he  sets  up  a  Council  of  Conciliation 
consisting  of  one,  two  or  three  assessors  representing  the 


STRIKES  263 

employers,  and  an  equal  number  representing  the  work- 
ers. Except  under  special  circumstances,  every  assessor 
"  must  be  or  have  been  actually  and  bona  fide  engaged 
or  employed  either  as  an  employer  or  as  a  worker  in  the 
industry." 

Every  dispute  must  be  referred  to  the  Council  before 
proceeding  to  the  Court;  and  in  every  case  the  Council 
is  required  to  make  a  recommendation, 
which  has  no  binding  force,  but  operates  Conciliation 
merely  as  a  suggestion  for  the  amicable  Encouraged 
settlement  of  a  dispute  by  mutual  agree- 
ment and  as  a  public  announcement  by  the  Council  as  to 
the  merits  of  the  dispute.  In  this  respect,  the  new  law 
resembles  the  Lemieux  Act  of  Canada,  which  is  a  sys- 
tem of  investigation  and  conciliation.  However,  an 
agreement,  when  filed,  has  all  the  force  of  an  award ;  and, 
if  the  Council  fails  to  effect  a  settlement,  the  dispute 
is  automatically  referred  to  the  Arbitration  Court. 

The  Amendment  Act  of  1908  is  a  modification  of  the 
former  system  in  the  direction  of  voluntary  conciliation. 
Mr.  Millar  said  in  the  House: 

"  The  main  principle  of  the  Bill  is  to  let  us  go  back  to  concilia- 
tion as  far  as  possible."    (Parliamentary  Debates,  vol.  145,  p.  186.) 

At  another  time  he  said : 

"  In  my  opinion  there  are  times  when  the  compulsory  element 
requires  to  be  used.  I  desire  to  keep  the  Arbitration  Court  quite  in 
the  background,  like  a  spectre  that  may  be  brought  forward  and 
made  substantial  if  required."     {Ibid.,  p.  480.) 

Thus,  the  new  law  is  in  accordance  with  the  views  of 
Mr.  Reeves,  the  author  of  the  Act  of  1894,  who  believed 
that  most  disputes  could  be  settled  by  conciliation,  and 
favoured  arbitration  only  as  a  last  resort.  However,  the 
Amendment  Act  provides  for  compulsory,  and  not  volun- 
tary conciliation ;  and  there  is  reason  to  think  that  com- 


264     STATE  SOCIALISM  IN  NEW  ZEALAND 

pulsory  conciliation  is  not  conciliation  at  all,  but  com- 
pulsory arbitration  under  another  name;  and  it  is,  in  the 
last  analysis,  State  regulation  of  wages  and  all  other 
conditions  of  labour. 

But  there  is  a  way  by  which  the  workers  may  alto- 
gether evade  the  arbitration  law  and  strike  as  much  as 

they  please  without  rendering  them- 
Cancellation  of  selves  liable  to  penalties.  After  the 
Registration         expiration  of  an  award,  they  have  only 

to  cancel  their  registration  or  allow  it  to 
be  cancelled  by  the  Department  for  neglecting  to  send  in 
their  annual  returns.  This  was  done  by  the  Point  Eliza- 
beth miners,  who,  therefore,  could  not  be  punished  for 
striking.  During  the  year  ending  March  31,1 909,  sixteen 
workers'  unions,  and  a  like  number  of  employers'  unions, 
had  their  registration  cancelled  for  the  same  neglect, 
while  two  other  unions  formally  cancelled  their  registra- 
tion. (Annual  Report  of  the  Department  of  Labour, 
1909,  p.  23.)     In  the  words  of  Mr.  Millar: 

"  The  right  to  strike  has  not  been  denied  by  the  House.  If  the 
men  do  not  Hke  to  voUintarily  surrender  their  rights,  let  them  regis- 
ter under  the  Trades  Unions  Act  and  go  on  strike  every  day  in  the 
week;  but  when  we  pass  an  Act  giving  them  advantages  they  could 
not  otherv/ise  get  —  giving  them  permanency  of  employment  and 
regulating  wages,  and  so  preventing  sweating  —  I  think  it  is  not 
too  much  to  ask  that  they  should  voluntarily  carry  out  their  agree- 
ment and  not  strike."    (Parliamentary  Debates,  vol.  145,  p.  482.) 

There  are  some  weak  features  in  the  new  Act,  as 
there  must  be  in  any  attempt  to  deal  with  so  difficult  a 
subject,  but  hitherto  it  seems  to  have 
Success  of  had  a  fair  degree  of  success.    (A  series  of 

Act  Doubtful       ten  articles  in  the  Evening  Post,  Welling- 
ton, September  17  to  October  5,  1908.) 
Mr.  F.  W.  Hobbs,  President  of  the  Canterbury  Em- 
ployers' Association,   says: 

"  The  new  system  has  not  had  a  long  enough  trial  to  warrant  any 
definite  opinion  being  expressed  as  to  whether  the  expectations 


STRIKES  265 

formed  of  it  will  be  realized.  Undoubtedly,  a  large  majority  of  the 
disputes  which  have  come  before  the  Councils  have  been  settled, 
cither  wholly  or  in  part,  and  thus  the  work  of  the  Arbitration  Court 
has  been  considerably  lessened.  The  operation  of  the  Act  will  be 
closely  watched,  as  it  is  generally  recognized  that  its  failure  will 
bring  the  end  to  compulsory  arbitration  as  a  means  of  settling  our 
industrial  disputes."  (Annual  Report  of  the  Canterbury'  Em- 
ployers' Association,  July  23,  1909.) 

Undoubtedly,  most  of  the  people  of  New  Zealand 
earnestly  desire  that  the  Act  may  prove  successful,  and 
the  employers,  as  a  class,  notwithstand- 
ing their  frequent  criticisms  and  their       "    **^     pmion 
dislike  of  regulation,  would  rather  have    Arbitration 
arbitration  than  strikes,  provided  that 
the  Court  is  reasonable  in  its  decisions,  as  it  has  been 
in  the  past,  and   does  not  put  upon  them    a  greater 
burden  than  they  can  bear.      The  employers  will  not 
move    for    the  repeal  of   the  Act,  but  will  throw  the 
responsibility  for  its  success  or  failure  wholly  upon  the 
shoulders  of  the  workers. 

The  workers  are  in  an  embarrassing  position.     The 
Act  was  passed  for  their  benefit,  as  well  as  to  prevent 
strikes;  but  when  it  could  no  longer  be 
used  as  a  machine  for  raising  wages  they    Position  of  the 
were  the  first  to  rebel  against  it.    Doubt-    Workers 
less,  a  large  per  cent.,  if  not  a  majority, 
of  union  labourers  have  been  much  dissatisfied  with  the 
Act,  and  yet  most  of  them  are  disposed  to  give  the 
Amendment  a  fair  trial.    The  more  radical  among  the 
workers,  many  of  whom  are  socialists  of  the  type  of  Tom 
Mann,  regard  the  Arbitration  Court  as  an  instrument  of 
capitalism  in  keeping  the  working  class  in  subjection, 
would  abolish  the  Act,  and  inaugurate  a  period  of  indus- 
trial warfare  as  a  prelude  to  the  social  revolution. 

But  the  more  conservative  among  the  workers  wish  to 
do  all  they  can  to  preserve  industrial  peace.    The  Hon. 


266     STATE  SOCIALISM  IN  NEW  ZEALAND 

J.    T.  Paul,  one   of   the   most   capable    of    the    labour 
leaders,  said  in  the  Council: 

Labour  Leaders  ,.  ''  {  ^^""^  no  hesitation  whatever  in  saying 
that  I  am  totally  opposed  to  the  strike,  that  I 

opposed  to  s(.e  ahsokitely  no  good  in  it,  and  I  oppose  it  for 

Striking  one  reason,  that  it  is  against  the  interests  of  those 

whose  welfare  I  have  most  deeply  at  heart,  and 

against  the  interests  of  the  general  community.     Strikes  cannot  be 

supported,  because  they  do  not  help  the  worker." 

In  the  same  debate  Mr.  Paul  quoted  with  approval 

the  words  of  Mr.  Pritchard,  who  was  a  prominent  and 

almost  violent  supporter  of  the  Blackball  miners  in  the 

strike  of  1908,  who  said: 

"  There  is  a  tendency  among  a  few  trade  union  leaders  to  influ- 
ence the  members  of  their  organizations  to  cancel  the  unions'  regis- 
tration under  the  Act  and  I  wish  as  a  unionist  to  protest  emphati- 
cally against  such  action  on  their  part.  I  want  to  see  the  best  possi- 
ble method  of  obtaining  as  much  as  possible  of  the  product  of  labour 
for  the  labourer,  and,  to  my  mind,  the  best  system  so  far  discovered  is 
that  of  compulsory  arbitration."  (Parliamentary  Debates,  vol. 
145.  P-  570.) 

The  workers  are  probably  in  error  in  thinking  that 
the  wages  of  all  classes  of  labour  can  be  raised  much 
above  the  market  value  by  means  of 
Market  Value  unions  and  strikes,  by  the  awards  of  a 
of  Labour  court,  or  by  any  means  other  than  in- 

creasing the  efficiency  and  limiting  the 
supply  of  labour.  It  would  probably  be  the  best  policy 
for  the  working  class  to  accept  rates  of  wages  based  on 
the  market  value  of  labour,  to  encourage  the  highest 
possible  ef^ciency,  and  to  increase  the  provision  already 
made  against  accident,  sickness  and  old-age,  by  means 
of  insurance  supported  by  taxation  of  the  incomes  of 
the  rich. 

But  in  particular  cases,  as  has  been  shown  by  the 
success  of  most  of  the  recent  strikes,  organized  labour 
can  frequently  force  concessions  which  the  Arbitration 
Court  would  not  grant,  and  which,  if  given  to  all  the 


STRIKES  267 

working  class,    the  industries  of   the   Dominion   could 

not  stand.     The  unionized   workers,  then,   numbering 

about    50,000    out    of     about    420,000 

breadwinners,  have  interests  somewhat        ower  o 

,  ,  r       1  •  Organized 

opposed     to     those    01     the     non-union      Labour 

workers  as  well  as  to  the  interests  of 
the  employers  and  many  other  people.  If,  therefore, 
the  unions  adopt  the  policy  of  cancelling  their  registra- 
tion, and  try  to  force  concessions  from  their  employers 
by  means  of  strikes,  they  will  lose  the  advantages  en- 
joyed under  the  Act;  and,  what  will  be  far  more  serious, 
they  will  lose  the  sympathy  of  the  general  public,  by 
whose  assistance  they  have  obtained  the  most  advanced 
labour  legislation  in  the  world. 

The  future  of  compulsory  arbitration  will  depend 
upon  the  attitude  of  the  workers.    They  could  have  the 
Act  repealed  at  any  time,  but  they  are  The  Success  of 
not  likely  to  do  that.     If  they  find  that  Arbitration  de- 
they  gain  nothing  by  compulsory  arbi-  pends  upon  the 
tration,    they    will    simply    allow    their  Workers 
registration  to  be  cancelled,  after  which  they  may  strike 
or  not  as  they  see  fit,  and  the  Act  will  become  a  dead  let- 
ter.    Another,  and  more  consistent  course  which  they 
might  adopt  would  be  to  stand  by  the  Act  and  take  a 
more  active  part  in  politics  with  the  hope  of  being  able 
to  control  the  appointment  of  the  Judge  of  the  Arbitra- 
tion Court,  through  whom  they  might  obtain  conces- 
sions impossible  to  secure  under  the  present  political  con- 
ditions.   This,  however,  has  the  appearance  of  a  forlorn 
hope;  for  even  if  an  independent  labour  party  could  step 
into  power,  as  in  Australia,  they  could  not  do  much  more 
for  labour  than  has  been  done  by  the  Liberal  Party, 
without  serious  damage  to  the  industries  of  the  Dominion 
and  serious  injury  to  themselves. 


268     STATE  SOCIALISM  IN  NEW  ZEALAND 

Dr.  Findlay  sums  up  the  subject  thus: 

"  It  should  be  the  aim  of  every  country  to  prevent  strikes,  not 
by  severe  pains  and  penalties,  but  by  providing,  if  it  be  possible,  such 
conditions   of   labour,  and  such   a  fair,  prompt 
The  Arbitration  and  competent  tribunal  as  will  secure   to   the 
Act  still  an  workers  all  they   can   ever   reasonably   hope   to 

p,  .  attain  by  a  resort  to  the  blind  force  of  a  strike." 

isxpenment  ^„  Labour  and  the  Arbitration  Act,"  p.  i6.) 

At  present,  the  workers  do  not  expect  to  gain  much 
by  appealing  to  the  Arbitration  Court;  but  perhaps  they 
require,  not  pains  and  penalties,  to  keep  them  loyal  to 
the  Government  and  the  Court,  but  additional  induce- 
ments of  some  sort.  Possibly  the  system  of  arbitra- 
tion could  be  brought  into  some  relation  to  the  system 
of  insurance  and  pensions,  so  that  workers  peacefully 
disposed  might  receive  rewards  not  granted  to  those 
who  prefer  to  appeal  to  force  regardless  of  the  welfare 
of  their  fellow  citizens.  However  that  may  be,  it  is  to  be 
hoped  that  the  interests  of  all  concerned  will  be  secured 
by  methods  of  peace,  and  that  there  will  be  a  successful 
outcome  to  the  magnificent  experiment  of  compulsory 
arbitration. 


CHAPTER    XVI 

WAGES  AND  THE  COST  OF  LIVING 

Wages  have  always  been  high  in  New  Zealand,  as  in 
Australia,  the  United  States,  Canada  and  all  other  new 
and  prosperous  countries.  The  rates 
of  wages  paid  in  the  Province  of  Well-  Wages  High  in 
ington  in  1873  were  not  much  less  New  Zealand 
than  those  obtaining  at  the  present  time. 
For  example,  farm  labourers  received  355.  ($8.75)  a  week, 
with  board;  carpenters,  masons  and  bricklayers  received 
from  105.  ($2.50)  to  125.  ($3)  a  day;  general  labourers 
75.  ($1.75)  to  85,  ($2)  a  day,  and  so  on.  (Official  Hand- 
book of  New  Zealand,  1875,  p.  70.)  On  the  other  hand, 
the  cost  of  living,  as  measured  by  the  price  of  food,  was 
rather  less  than  it  is  now,  and  the  standard  of  living  was 
much  lower,  so  that  the  workman  of  that  period  was 
quite  as  prosperous  as  his  successor  of  the  present  day. 
Besides,  the  opportunities  of  improving  his  condition, 
especially  by  acquiring  land,  were  exceptionally  good ;  and 
many  immigrants  who  came  to  New  Zealand  in  the 
seventies  with  little  or  no  capital  are  now  well-to-do 
people  with  land  and  other  property  worth  thousands  of 
pounds. 

Labour  conditions  in  New  Zealand  are  very  similar 
to  those  prevailing  in  Iowa,  Kansas,  Nebraska,  Colorado 
and  other  Western  states  of  the  Union.  Comparison 
True,    New    Zealand    is    more    remote  with  the  West- 
f rom  the  markets  of  the  world ;  but  it  ern  States  of  the 
has  an  advantage  in  that  its  products  Union 
are  shipped  to  the  European  markets  by  sea,  and  the 

269 


270     STATE  SOCIALISM  IN  NEW  ZEALAND 

steamship  charges  on  wool  and  mutton  from  WelUngton 
or  Auckland  to  British  ports  are  little,  if  any,  higher  than 
the  combined  railway  and  steamship  charges  from  Den- 
ver, Omaha,  or  other  interior  cities  of  the  United  States. 
Therefore,  the  products  of  New  Zealand  can  readily  be 
put  upon  the  European  markets,  and  employers  can 
afford  to  pay  good  wages,  while  the  enormous  distance 
which  European  labourers  must  travel  to  reach  New 
Zealand  deters  them  from  going  there  and  diverts  the  tide 
of  emigration  to  the  United  States,  Canada  and  even 
South  America.  If  New  Zealand  were  closer  to  Europe 
it  would  get  its  full  share  of  immigration,  its  resources 
would  be  rapidly  developed,  and  it  would  not  be  long  be- 
fore wages  would  fall,  for  New  Zealand  is  a  country  of 
limited  resources  and  the  point  of  diminishing  returns 
would  soon  be  reached. 

Rates  of  wages  and  the  cost  of  living  vary  somewhat 
in  different  parts  of  the  Dominion,  but  taking  both  to- 
gether there  is  not  much  difference. 
Variation  in  For  example,  wages  are  higher  in  Well- 
Wages  ington  than  in  Auckland,  but  in  Well- 
ton  the  cost  of  living,  especially  in  rents, 
is  higher  than  in  the  Northern  city,  so  that  the  labourer  is 
about  as  well  off  in  one  place  as  another.  In  Westland, 
again,  both  wages  and  the  cost  of  living  are  higher  than  in 
Wellington. 

The  following  tables  give  the  wages  of  typical  classes 
of  labourers  and  the  retail  prices  of  staple  articles. 
Comparison  of  chiefly  food  products,  in  and  about  Well- 
Wages  and  Rrices  ington,  the  capital  city  of  New  Zealand, 
in  Wellington  and  Denver,  the  capital  of  Colorado.  A 
and  Denver  comparison  between  New  Zealand  and 

Colorado  is  peculiarly  fitting;  since  both  are  new  States 
with  large  undeveloped  resources;  the  area  and  population 


WAGES  AND  THE  COST  OF  LIVING      271 

of  both  are  about  the  same;  both  are  partly  mountainous; 
the  industries  of  both  are  chiefly  agricultural,  pastoral 
and  mining;  and  wages  and  the  cost  of  living  in  both  are 
high.  The  figures  for  Wellington  are  from  the  Year- 
Book  of  1909,  the  Report  of  the  Department  of  Labour 
for  1909,  and  the  Journal  of  the  Department  of  Labour 
for  April,  1910.  The  figures  for  Denver  are  the  results 
of  an  investigation  by  Mr.  W.  F,  Templin,  a  senior  stu- 
dent in  the  University  of  Denver.  It  should  be  noted 
that  the  New  Zealand  figures  were  compiled  toward  the 
end  of  summer  in  the  Southern  hemisphere,  while  the 
Denver  figures  were  obtained  about  the  beginning  of 
summer  in  the  Northern  hemisphere. 

Average  rates  of  Wages  in  the  Provincial  District  of 
Wellington  during  the  year  1908  compared  with  wages  in 
Denver  and  vicinity  on  May  i,  19 10: 


Description  of  Labour 

Wellington 

Denver 

Farm   laborers,  with  board 

20s.  to  2SS.  ($4.80  to  $6) 
ISS.  to  25s.  (S3. 60  to  $6) 
£65  to  £80  ($325  to  $400) 
17s.  6d.  to  22s. (S4.20  to $5.28) 
2SS.  to  30s.  ($6  to  $7-20) 
15s.  to  20S.  ($3.60  to  S4-80) 
8s.  to  9s.  ($1.92  to  $2.16) 

IDS.  ($2.40) 

98.  to  los.  (J2.16  to  J2.40) 

45s.  to  60.9.  (S10.80  to  S14.40) 
I2S.  to  14s.  (S2.88  to  S3-36) 
I2S.  &d.  (S3-40) 
12.S.  8d  (S3. 40) 

lOS.  to  I2S.  ($2. 40  to  $2.88) 

los.  ($2.40) 

los.  to  I2S.  (S2.40  to  $2.88) 
gs.  4<i.  to  IDS.  ($2.2410  $2. 40) 
8s.  4d.  to  los.  ($2  to  $2. 40) 

31S.  3d.  ($7. 50) 

Female  farm  servants  with 

[$8.40) 
25s.  to  3S8.  ($6  to 

Shepherds,  with    board  per 

annum 

Shearers.with  board,  per  loo 

£84  (S420) 

3S5.  Sd.  ($8.50) 

[$14.40) 
50S.  to  60s.  ($12  to 

[$7.20) 
25s.  to  303.  ($6  to 

Men  cooks  on  stations,  with 

board,  per  week 

General  house  servants,  with 

General     laborers,    without 

[$2. 50) 

73.  to  los.  sd  [$i.6S  to 

Miners,  without  board,  per 

($3.50) 
I2S.  6d.  to  14s.  7d.  ($3 

Engine      drivers,      without 

19s.  (S4.56) 

Bakers,  without  board,  per 

[I20) 

SOS.  to  83s.  ($12  to 

20s.  lod.  (Ss) 

Plasterers,  per  day 

Bricklayers,  per  day 

Carnenters,  per  day 

Black^^miths,  per  day 

23''-.  (S5.S0) 
2SS.  (S6) 
20s.  ($4.80) 
rss-  (S3-6o) 
20s.  lod.  ($s) 

Painters,  per  day 

Shoemakers,  per  day 

i8s.  ($4.50)        [$4.80) 
I2S.  to  20S.  ($2.80  to 

272      STATE  SOCIALISM  IN  NEW  ZEALAND 

Retail  prices  of  commodities  in  Wellington,  on  March 
I,  1910,  and  in  Denver,  on  May  i,  1910: 


Commodity 


Wellington 


Denver 


Bread,  per  2  pound  loaf 

Butter,  I  pound,  factory 

Flout,  25  pounds 

Oatmeal,  25  pounds 

Eggs,  new-laid,  per  dozen 

Tea,  lowest  price 

Tea,  highest  price 

Coffee,  first  quality  per  lb 

Milk,  per  quart 

Pork,  per  pound 

Beef,  sirloin,  per  pound 

Beef,  prime  ribs 

Beef,  rump  steak 

Mutton,  leg,  per  pound 

Mutton,  chops 

Bacon,  middle  cut 

Fish  flounders,  per  pound 

Potatoes,  per  14  pounds 

Tomatoes,  per  pound 

Apples,  cooking,  per  pound 

Bananas,  per  dozen 

Onions,  per  pound 

Kerosene,  per  quart 

Coal,  1/4  ton  (560  lbs.  in  Wellington 

500  lbs.  in  Denver 

Gas,  per  1,000  feet,  net 


3V2d.  (7c.) 
IS.  id.  (26c.) 
38.  bd.  (88c.) 

3*.  3d.  (78c.) 
IS.  lod.  (44c.) 
IS.  (24c.) 

28.  2d.   (52c.) 

18.  8d.  (40c.) 
4d.  (8c.) 
6d.  (12c.) 
6d.  (i2c.) 
4d.  (8c.) 
7d.  14c.) 
4d.  (8c.) 
5d.  (loc.) 
I  id.  (22c.) 

6d.  (i2c.) 
IS.  (24c.) 
3d.  (6c.) 
2d.  (4c.) 
6d.  (i2c.) 

id.  (2C.) 

Sd.  (loc.) 
78.  6d.  to  los.  Sd. 

(I1.80  to  $2.56) 
58.  sd.  ($1.30) 


4V4d.  (81/20.) 
IS.  sd.  (34c.) 
28.  8d.  to  3s.  id. 

(6sc.  to  75c.) 
3S.  id.  (75c.) 
IS.  Vzd.  (25c.) 
7V2d.  (ISC.) 
38.  1 1/2 d.  (7sc.) 
IS.  8d.  (40C.) 

4d.  (8c.) 
8V2d.  (17c.) 
7d.  (14c.) 
I2y2d.  (2SC.) 
I2V'2d.  (2SC.) 

lid.  (22c.) 

1 2 1/2  d.  (25c.) 

lid.  to  I7y2d.  (22c. 

to  35c.) 
lod.  (20C.) 
5V2d.  (lie.) 
sd.  (IOC.) 
iV2d.  (3c.) 
7y2d.  to  i2V2d. 

dsc.  to  25c.) 
2d.  (4c.) 
2y2d.  (5C.) 
58.  sd.  to  6s.  lod. 

($1.30  to  $1.65) 
48.  7d.  (Si. 10) 


Rents  of  houses  let  to  workmen  in  Wellington  and 
Denver : 


House  of 


Wellington 


Denver 


4  rooms,  per  week 

5  rooms,  per  week 

6  rooms,  per  week 

7  rooms,  per  week 


I2S.  to  218.  (S2.80  to  Is) 
14s.  to  22s.  (S3. 36  to  S5-30) 
i6s.  to  2SS.  ($3.84  to  $6) 
20S.  to  27s.  (54.80  to  J6.S0) 


I2S.  to  iSs.  (J2.80  to  $5) 
158.  to  26.5.  (S3. 60  to  $6.40) 
18.S.  to  31S.  (J4-30  to  l7-4o) 

228.  to  34s.  (55.30  to  J8, 15.) 


From  these  statistics  it  will  be  readily  seen  that  the 
wages  of  almost  every  kind  of  labour  are  much  higher 
in  Denver  than  in  Wellington.  The  only  exception  to 
this  rule  is  the  case  of  general  labourers,  who  are  almost 
as  well  paid  in  Wellington  as  in   Denver.     In  fact,  the 


WAGES  AND  THE  COST  OF  LIVING      273 

average  pay  of  unskilled  labour  in  New  Zealand  and  in 

Australia  is  somewhat  higher  than  the  average   pay  of 

the  same  kind  of  labour  in  the  United 

^  ,  ,  ,•  r  Wages  Higher 

States,    where   a    large    proportion    ot  .    j^g^^g^ 

unskilled  labourers  are  either  negroes 
or  foreigners.  Besides,  the  wages  of  unskilled  labourers 
in  New  Zealand  are  not  much  less  than  the  wages  of  some 
classes  of  skilled  labourers.  For  example,  in  Wellington 
general  labourers  receive  from  8s.  to  95.  a  day,  while  car- 
penters receive  only  from  105.  to  125.,  and  shoemakers 
from  8s.  4d.  to  105.  The  same  level  rate  of  wages  pre- 
vails in  all  the  Australian  States.  On  the  other  hand, 
bricklayers  in  Denver  receive  nearly  three  times  as  much 
as  common  labourers.  Dr.  Victor  Clark  explains  this 
peculiar  condition  as  follows: 

"  The  demand  for  unskilled  workers,  in  pro-  ^phe  Wages  of 
portion   to   artisans   and   factory   operatives,   is  ^ 

greater  in  undeveloped  colonies,  like  Australasia  Unskilled  Labour 
and  New  Zealand,  than  in  an  older  country  like  relatively  High 
Great  Britain.  England  is  in  so  marked  a 
degree  a  manufacturing  country,  that  the  British  immigration  to 
Australasia  probably  contained  a  larger  proportion  of  skilled 
workers  than  a  new  country  required.  On  the  other  hand,  the 
immigrants  to  the  United  States  have  been  very  largely  land-seekers 
from  the  unskilled  rural  population  of  Europe.  Another  potent 
influence  in  raising  the  wages  of  untrained  workmen  in  Australasia 
has  been  the  high  profit  of  primary  production,  due  to  natural 
resources  large  in  proportion  to  population.  Other  things  being 
equal,  the  most  productive  industry  usually  pays  the  highest 
wages."      ("The   Labour   Movement   in  Australasia,"  p.  53.) 

A  comparison  in  regard  to  wages  between  typical 
cities  in  New  Zealand  and  the  United  States  is  probably 
the  fairest  and  most  accurate  that  can  be  Comparison  be- 
made.  If  one  were  to  compare  average  tween  New  Zea- 
wages  in  New  Zealand  with  an  average  land  and  the 
for  the  whole  of  the  United  States,  the  United  States 
result  would  probably  be  somewhat  more  favourable  to 
New  Zealand,  but  would  not  be  quite  fair  to  the  United 


274      STATE  SOCIALISM  IN  NEW  ZEALAND 

States,  where  the  average  is  brought  down  by  the  low 
wages  of  unskilled  colored  labour  in  the  southern  States 
and  unskilled  foreign  labour  in  the  more  densely  popu- 
lated parts  of  the  northern  States.  But  such  statistics 
as  are  available  show  that  average  wages  are  higher  in 
the  United  States  than  in  New  Zealand.  For  example, 
the  New  Zealand  Census  of  1906  gives  the  average 
amount  of  wages  paid  to  male  hands  in  the  manufactories 
in  the  year  1905  as  £88:105.  ($430),  and  the  average 
w^iges  paid  to  female  hands  as  £41:175.  ($203),  making 
an  average  for  all  the  employees,  allowing  for  the  number 
of  male  and  of  female  hands,  of  £79  ($383).  On  the 
other  hand,  similar  statistics  in  the  reports  of  the  United 
States  Census  for  1900  show  that  the  average  wages  paid 
by  the  industrial  combinations  in  the  year  1900  was  $488 
(£100) ;  while  the  average  for  all  the  manufacturing  indus- 
tries was  $438;  the  average  for  male  workers  over  16 
years  of  age  being  $490  (£101),  the  average  for  women 
over  16  years  of  age  being  $272  (£56),  and  the  average 
for  children  under  16  years  $153  (£31).  (New  Zealand 
Official  Year-Book,  p.  544;  Twelfth  Census  of  the  United 
States,  vol.  8,  p.  982;  vol.  7,  p.  Ixxxi.) 

The  table  of  retail  prices  in  Wellington  and  Denver 

shows  that  the  prices  of  meat,  especially  mutton,  are 

much  lower  in  Wellington  than  in  Den- 

ow     rice  o         ^^^     -phg  cause  of  this  is,  of  course,  that 

Mutton  in  New       ,        ,  .   r  •     ,  r  ^r        r,     ,       1  •      1 

Zealand  ^"^  chief  mdustry  of  New  Zealand  is  the 

raising  of  sheep.  Indeed,  before  the 
beginning  of  the  meat  freezing  industry  the  price  of 
mutton  was  much  lower  than  it  is  now.  In  1873  the 
regular  retail  price  of  mutton  in  Wellington  was  2>d.  (6c.) 
a  pound  (Official  Handbook  of  New  Zealand,  1875, 
p.  71),  and  in  the  country  districts  a  whole  sheep  could 
som.etimes  be  bought  for  sixpence,    (12c.),   and  sheep 


WAGES  AND  THE  COST  OF  LIVING      275 

farmers  were  known  to  destroy  unmarketable  sheep  after 
shearing.  It  should  be  noted  that  the  price  of  meat  in 
New  Zealand  on  March  i,  1910,  were  lower  than  usual, 
while  the  prices  in  Denver  were  higher  than  usual.  It  is 
surprising,  considering  the  relative  prices  of  mutton  in 
the  two  countries,  that  New  Zealand  mutton  is  not  im- 
ported into  the  United  States,  especially  as  the  import 
duty  is  by  no  means  prohibitive. 

The  prices  of  other  articles  of  food  vary  considerably. 
Flour  is  cheaper  in  Denver,  but  the  price  of  bread  is 
higher,  probably  because  the  wages  of 
bakers  and  the  other  expenses  of  baking  Other  Articles 
are  higher  in  Denver.  The  price  of  of  Food 
butter  is  higher  in  Denver.  The  price  of 
new-laid  eggs  varies  with  the  season,  falling  to  is.  (24c.) 
in  Wellington,  and  rising  to  40c.  (15.  8^.)  or  more  in 
Denver.  Potatoes  are  usually  cheaper  in  Denver,  as  are 
most  vegetables,  also  apples,  peaches,  strawberries  and 
other  fruits.  However,  bananas  and  oranges  are  much 
cheaper  in  W^ellington,  being  imported  from  the  "islands," 
although  the  island  oranges  are  not  equal  in  quality  to 
those  of  California  and  Florida.  Coal  is  expensive  in 
New  Zealand,  but  the  winter  climate  In  most  parts  is 
milder  than  that  of  Colorado  and  less  coal  is  required  for 
heating  purposes. 

Woollen  clothing  is  cheaper  in  Wellington  than  in 
Denver,    but    cottons    are    cheaper    in    Denver,    also 
silks    and    fancy    articles    of    many    kinds.      For    six 
guineas  ($30)  a  man  can  get  an  excellent 
tailor-made   suit   in   Wellington,    which      Clothing 
would  cost  at  least  $40  (£8)  in  Denver, 
but  the  Denver  made  suit  would  be  superior  in  fit  and 
finish  to  the  Wellington  product.     However,  for  $30  one 
could  get  in  Denver  as  good  a  suit  ready-made.    Cer- 


276      STATE  SOCIALISM  IN  NEW  ZEALAND 

tainly,  a  workingman  could  buy  clothes  as  cheaply  in 
Denver  as  in  Wellington,  but  they  would  not  be  made  to 
order.  It  is  the  same  with  boots  and  shoes,  which  are 
somewhat  cheaper  in  Wellington  if  made  to  order,  but 
ready-made  shoes  are  much  cheaper  in  Denver.  When 
New  Zealanders  travel  in  the  United  States  they  gener- 
ally buy  a  large  supply  of  American  shoes. 

Rents  are  very  high  in  Wellington  as  compared  with 
other  New  Zealand  cities,  but  somewhat  lower  than  in 
Denver.    However,  most  of  the  houses  in 
Board  and  Wellington  are  built  of  wood,  while  prac- 

Lodging  tically  all   Denver  houses  are  of  brick. 

At  the  best  hotels  in  Wellington  the  rates 
are  from  los.  to  12s.  ($2.50  to  $3)  a  day,  American  plan. 
Similar  accommodations  in  Denver  would  cost  from  $3 
(125.)  to  $3.50  (145.)  a  day.  At  the  best  boarding-houses 
in  Wellington  the  rates  are  about  £2:105.  ($12.50)  a  week, 
or  less,  while  in  Denver  the  standard  rate  is  about  $15 
(£3)  a  week.  In  Denver  a  workingman  can  get  good 
board  and  room  for  $5  (£1)  a  week,  and  he  could  not  do 
much  better  than  that  in  Wellington.  Generally  speak- 
ing, one  would  get  better  rooms  in  Denver  and  better 
board  in  Wellington.  Rooms  in  Denver  would  almost 
invariably  be  heated  in  winter,  while  in  Wellington  fires 
would  involve  an  extra  charge. 

Comparisons  such  as  these  are  very  difificult  to  make, 
since  there  are  a  thousand  and  one  circumstances  of  which 
statistics  cannot  take  account.     But  the 
Accurate  Com-    in^jjcations  point  to  the  conclusion  that 
parisons    Diffi-        ,  .,       ,  r  i-    •        •  1^1 

cult  to  Make      while  the  cost  of  livmg  is  somewhat  less 

in  Wellington  than  in  Denver,  the  wages 
of  labour  are  considerably  higher  in  Denver,  and  the 
Denver  labourer  is  better  off  than  his  brother  in  Welling- 
ton, since  there  is  no  reason  to  think  that  employment  is 


WAGES  AND  THE  COST  OF  LIVING       277 

more  regular  in  the  one  place  than  in  the  other.  This 
conclusion  is  not  materially  different  from  that  of  Dr. 
Victor  Clark,  who  compares  Australasia  in  general  with 
the  United  States  in  general.    He  says: 

"  The  general  welfare  of  the  working  classes  in  Australasia  does 
not  differ  widely  from  that  in  the  United  States.  The  hours  of  work 
are  fewer  in  most  occupations,  but  the  wage  per  hour  is  less  than  in 
America.  The  cost  of  living  is  about  the  same  in  both  countries." 
("  The  Labour  Movement  in  Australasia,"  p.  51.) 

More  important  than  a  comparison  of  wages  and  cost 
of  living  in  different  countries  is  a  comparison  relating  to 
the  same  country  at  different  times,  and 
the  latter  can  be  made  with  much  greater  I"*^*"ease  in 

^,  .      -  A  r  Wages  and  Cost 

accuracy  than  the  former.    A  few  years  ^£  Living 

ago  it  was  commonly  said  in  New  Zealand 
that  wages  in  the  preceding  ten  or  twelve  years  had  in- 
creased less  than  the  cost  of  living,  and  the  inference  was 
that  the  workers  had  gained  little  or  nothing  from  all  the 
social  experiments  since  the  time  of  Ballance.  In  The 
Liberator,  a  single-tax  publication,  the  following  statement 
was  quoted  from  some  other  publication,  which,  again, 
derived  it  from  some  unknown  source : 

"  Mr.  Coughlan,  Government  Statistician  of  New  South  Wales, 
affirms  that  wages  have  risen  8}4  per  cent,  in  New  Zealand  during 
the  last  fifteen  years.  In  the  large  centers  during  that  time  meat 
has  advanced  100  per  cent.,  house  rent  30  per  cent,  to  50  per  cent., 
and  other  items  from  10  per  cent,  to  50  per  cent."  (The  Liberator, 
Auckland,  November  10,  1904.) 

Strange  to  say,  no  one  was  able  to  find  the  foregoing 

statement  in  any  of  Mr.  Coughlan's  writings,  but  it  was 

widely  circulated.    About  the  same  time, 

Mr.  Tregear,  the  Secretary  for  Labour,      ,-P*^^*^ 

1  \,roii  •.  ^^-  Tregear 

m  a  letter  to  Mr.  Seddon,  said: 

"  The  results  of  the  Arbitration  Act  have  been  of  high  advan- 
tage to  the  whole  Colony,  as  the  great  prosperity  shown  by  every  in- 
dication of  the  economic  barometer  denotes.  Such  effects  are,  how- 
ever, rapidly  becoming  neutralized,  and  soon  only  the  empty  shell 


278      STATE  SOCIALISM   IN  NEW  ZEALAND 

of  an  apparent  prosperity  will  be  left  us  if  the  unbridled  coveteous- 
ness  of  a  few  be  not  regulated  and  checked.  Some  of  the  neces- 
saries of  life  cost  more  than  in  former  years;  their  price  is  rapidly 
advancing,  and  this  out  of  all  proportion  to  the  rise  in  wages  of 
producers.  There  has  been  no  fair  ratio  between  the  rise  in  wages 
and  the  rise  in  prices.  The  chief  devourer  of  the  wages  of  the  worker 
and  of  the  profits  of  the  employer  is  excessive  rent." 

In  1903,  Mr.  Tregear  presented  a  report  to  the  House 
showing  that  from  1893  to  1903  house-rent  in  Wellington 
had  risen  at  least  25  per  cent.;  meat,  30  per  cent.;  coal, 
10  per  cent.;  firewood  in  blocks,  50  per  cent.;  men's 
clothes  (to order),  16  per  cent. ;  sawn  timber,  40  per  cent. ; 
ham,  bacon  and  eggs,  25  per  cent."  (Return  H.  iiF- 
1903,  September  4.)  This,  however,  was  not  the  result 
of  a  complete  investigation  and  must  not  be  regarded  as 
final. 

Fortunately,  a  very  thorough  investigation  of  the  rise 
of  wages  and  food  prices  has  since  been  made  by  Mr. 
von  Dadelszen,  the  Registrar  General,  of  which  the 
A  Th         0h  following   is   a   summary   (Official  Year- 

Investigation        Book,  1908,  p.  539)  : 

ESTIMATED  RISE  IN  WAGES  AND  PRICES  OF 
NECESSARY   FOODS 

After  the  Census  of  1906  was  completed  a  calculation  was  made 
in  respect  of  wages  paid  in  the  various  divisions  of  labour, —  Agri- 
cultural, Pastoral,  Artisans,  Servants  and  Miscellaneous, —  to  show 
the  rise  since  1895.  The  calculation  has  since  been  extended  to  in- 
clude the  year  1907. 

Taking  the  figures  for  1906  in  each  occupation  to  represent  1 00 
as  a  standard,  the  proportions  to  this  of  the  rates  for  previous  years 
and  1907  were  ascertained  and  the  figures  for  the  different  groups 
were  duly  weighted  according  to  the  number  of  persons  in  each 
group. 

The  result  shows  the  index  number  for  each  year,  thus: 


1895 

84.8 

I90I 

89.7 

1896 

843 

1902 

93-4 

1897 

84.6 

1903 

96.5 

1898 

88.7 

1904 

98.6 

1899 

88.0 

1905 

98.0 

1900 

90.4 

1906 

100. 0 

1907 

104.9 

WAGES  AND  THE  COST  OF  LIVING      279 

Here  the  rise  in  wages  is  found  to  have  been  at  the  rate  of  23  per 
cent,  in  13  years. 

The  Manufactories'  returns,  collected  at  the  Census  of  1896 
and  1906,  which  state  hands  employed  and  wages  paid  were  utilized 
as  a  sort  of  rough  check  on  the  above.  They  showed  a  rise  of  19  per 
cent.,  including  both  sexes  and  all  ages,  between  the  years  1895 
and  1905. 

The  rise  in  the  price  of  provisions  for  the  same  years  was  also 
calculated  on  the  bare  necessaries  of  life  divided  into  three  groups, — 
animal  food,  vegetable  food  and  other  necessaries.  The  price  for 
1906  was  again  considered  to  equal  100,  and  the  proportions  to  this 
which  obtained  for  the  other  years  calculated.  I'he  weighting  was 
according  to  the  proportion  of  expenditure  on  the  different  classes 
of  articles  in  the  consumption  of  a  family. 

Index  numbers  were  found  to  be  as  under: 

1895  84.3         1901        89.6 

1896  86.1         1902       105.6 

1897  86.1         1903       100.5 

1898  87.4         1904        98.5 

1899  83.6         1905       102.0 

1900  86.0         1906       100. o 

1907  103.3 

The  rise  is  at  the  rate  of  22.5  per  cent,  for  13  years. 

The  result  of  the  whole  workings  was  to  show  that  wages  and 
prices  for  necessary  foods  had  advanced  at  nearly  equal  rates  in 
thirteen  years,  the  wages'  calculation  having  been  made  on  two  inde- 
pendent methods,  both  yielding  very  similar  probable  results.  No 
calculation  has  been  attempted  so  far  for  clothing  or  rent. 

Lacking   other   sources   of   information,    the   writers 
made  a  slight  investigation  of  the  rents  of  workmen's 
dwelHngs  in  and  about  Dunedin,  taking 
14  typical  houses  in  different  parts  of  the        j^        .. 
city,  and  found  that  the  rents  of  these 
houses    had    increased    on    the    average    about    20   per 
cent,  from  1897  to  1907. 

Altogether,  considering  merely  daily  or  weekly  wages 
and  the  cost  of  living,  it  cannot  be  said  that  the  material 
condition  of  labourers  in  New  Zealand 
has  improved  much,  if  any,  in  the  past    Improvement 
'  ,  TT  1  »»i  Condition 

ten   or    twelve   years.      However,    there   ^^  Labour 

have  been  practically  no  strikes  in  that 

time,  and  employment  has  probably  been  more  regular 

than  during  the  years  of  depression  before  1897,  so  that 


280      STATE  SOCIALISM  IN  NEW  ZEALAND 

the  worker's  yearly  wage  has  increased  more  than  his 
daily  or  weekly  wage.  Also,  the  various  labour  laws 
passed  since  the  time  of  Ballance, — laws  providing  for 
compensation  for  accidents,  regulating  the  hours  of 
labour,  providing  for  a  weekly  half-holiday,  securing 
proper  accommodation  for  shearers  and  agricultural 
labourers,  providing  cheap  dwellings  for  workers,  allow- 
ing old-age  pensions,  and  securing  many  other  advan- 
tages to  labourers  which  thej^  do  not  have  in  other  coun- 
tries,— these  laws  have  surely  been  of  some  benefit  to  the 
working  class,  especially  to  the  weak  and  unfortunate. 

But  it  would  be  impossible  for  labour  conditions  in 
New  Zealand  to  be  much  better  than  those  prevailing  in 

Australia;  for,  if  they  were,  Australian 
f^m*^*^^^'*''^  labourers  would  migrate  to  New  Zealand 
Australia  ^"^  there  would  soon  be  an  over-supply 

of  labour  and  wages  would  fall.  Mr. 
Tregear  attributes  the  slow  improvement  in  labour  con- 
ditions to  the  malignant  action  of  landowners  and  other 
capitalists;  but  even  if  the  workers  of  New  Zealand  re- 
ceived the  whole  product  of  industry,  including  rent,  they 
would  soon  have  to  divide  with  later  immigrants,  for 
labourers  are  constantly  migrating  to  and  fro,  and  no 
part  of  Australasia  or  New  Zealand  can  long  maintain 
any  great  advantage  over  any  other  part. 

The  legislators  of  New  Zealand  had  this  principle  in 
mind  when  the}'  required  twenty-five  years'  residence 
of  all  applicants  for  old-age  pensions.  If  such  a  restric- 
tion were  not  made,  the  Dominion  would  soon  be  flooded 
with  old  people  seeking  pensions.  But  the  same  principle 
applies  to  higher  wages,  lower  cost  of  living,  and  advan- 
tages of  every  kind,  which  the  Australasian  Colonies 
quickly  share  with  one  another  because  of  the  great 
mobility  of  labour.    This,  of  course,  is  not  an  argument 


WAGES  AND  THE  COST  OF  LIVING       281 

against  these  admirable  efforts  to  improve  labour  condi- 
tions, but  merely  a  partial  explanation  of  the  relatively 
slight  improvement  which  they  have  effected. 

That  the  depressing  effect  of  immigration  upon  wages 
is  no  mere  theoretical  abstraction,  is  clearly  seen  in  the 
attitude  of  the  workers  of  New  Zealand 

and    Australia     toward     Chinese     and  ...        ,*•..' 
1         A    •     •  T  -1        1  I       r  /-   1-    bition  of  Asiatic 

other  Asiatics.     Like  the  people  01  Cali-  immigration 

fornia,  the  people  of  Australasia  believe 
in  the  "  jellow  peril,"  realize  that  the  colonial  standards 
of  living  and  of  wages  could  be  destroyed  by  an  invasion 
of  coolies  from  Asia,  and  are  determined  at  all  hazards  to 
preserve  a  white  Australia  and  a  white  New  Zealand. 
For  example,  the  Commonwealth  of  Australia  has  a  law 
designed  to  prevent  the  immigration  of  all  Asiatics, 
whether  British  subjects  or  not,  by  means  of  a  "  dictation 
test,"  which  could  be  used  to  prevent  the  immigration  of 
undesirable  immigrants  of  any  nationality.  According 
to  this  extraordinary  law,  "  the  immigration  into  the 
Commonwealth  is  prohibited  of  any  person  who  fails 
to  pass  the  dictation  test,  that  is  to  say,  who,  when  an 
officer  dictates  to  him  not  less  than  fifty  words  in  any 
prescribed  language,  fails  to  write  them  out  in  that 
language  in  the  presence  of  the  officer."  A  Chinese, 
Japanese  or  Hindu  immigrant  would  surely  be  a  phe- 
nomenal linguist  who  could  pass  an  examination  of  this 
kind,  and  yet  no  offence  is  expressly  offered  to  the  people 
of  any  nationality,  for  none  are  mentioned  in  the  law. 

The  New  Zealand  law  is  more  objectionable  and  some- 
what less  stringent,  and  yet  it  serves  the 

purpose  quite  effectively.  There  is  a  poll-  J?      ^.^  ^*L 

f  f>        /*        N        ^,  .  .         •  Dictation  Test 

tax  01  i  1 00  ($500)  on  Chinese  immigrants;  combined 

and  "  The  Immigration  Restriction  Act, 

1908,"  prohibits  the  landing  of  lunatics  or  idiots,  persons 


282      STATE  SOCIALISM  IN   NEW  ZEALAND 

suffering  from  a  dangerous  or  loathsome  contagious 
disease,  certain  convicted  criminals,  and  any  person 
other  than  of  British  birth  who  fails  to  write  out  and 
sign,  in  any  European  language,  a  prescribed  form  of  ap- 
plication. Shipwrecked  persons  are  excepted.  (Year- 
Book,  1909,  p.  129.)  Needless  to  say,  there  are  few 
Asiatics  in  New  Zealand.  In  1881  there  were  5,004  Chin- 
ese in  the  Colony;  on  December  31,  1908,  there  were  only 
2,998.  During  that  year  538  Chinese  came  to  New 
Zealand,  of  whom  320  were  new  arrivals,  who  paid  in 
poll-tax  the  large  sum  of  £32,000  ($150,000).  Japanese 
have  never  come  to  New  Zealand  in  any  considerable 
numbers,  but  the  Act  of  1908  would  be  sufficient  to  keep 
them  out.  It  is  no  wonder  that  the  Dominion  willingly 
contributes  a  Dreadnought  to  the  British  navy,  and  would 
probably  welcome  an  alliance  with  the  United  States. 

But  not  only  are  the  labourers  of  New  Zealand  alive 
to  the  dangers  of  Asiatic  immigration ;    they  realize  also 

that  they  could  not  maintain  their  stand- 
Labour  Unions  4  r  r  •  •  c  *. 
,.  ,.,  ard  01  livmg  in  case  01  a  very  great 
dislike  .  .  .  °  .  _  T^  .  •  1 
Immigration        immigration    from    Great    Britain    and 

other  European  countries.  Quite  fre- 
quently letters  have  been  sent  to  English  papers  with  the 
object  of  dissuading  labourers  from  migrating  to  the 
Dominion  on  the  ground  that  the  labour-market  was 
already  well  supplied.  On  August  26,  1906,  the  presi- 
dent and  the  secretary  of  the  Canterbury  Trades  and 
Labour  Council,  Mr.  Rusbridge  and  Mr.  Barley,  sent  a 
letter  to  twenty-five  of  the  leading  papers  of  Great 
Britain  and  Ireland ;  warning  workers  against  coming  to 
New  Zealand,  giving  statistics  as  to  wages  and  prices,  and 
stating  that  the  natural  increase  of  the  population  was 
sufficient  to  supply  any  increasing  demands  for  labour, 
at  least  in  the  building  trades,  and  that  there  was  a  good 


WAGES  AND  THE  COST  OF  LIVING       283 

deal  of  unemployment,  particularly  in  the  winter  months. 
As  quoted  in  the  Manchester  Guardian,  the  writers  said: 

"  Our  object  in  taking  this  action  is  chiefly,  on  the  one  hand,  to 
disabuse  the  mind  of  those  who  may  be  under  the  impression  that 
New  Zealand  is  for  workers  a  reaHzation  of  Sir  Thomas  More's 
Utopia,  and,  on  the  other  hand,  to  prevent,  if  possible,  the  further 
crowding  of  our  already  over-stocked  labour  market.  Various 
reasons  can  be  given  for  the  congested  state  of  the  labour  market 
at  present;  but  the  principal  is  the  steady  inrush  of  immigrants 
from  Britain  and  the  Australian  States."  {The  Evening  Post,  Well- 
ington, October   19,   1906.) 

The  reason  why  New  Zealand  so  quickly  feels  the 
effects  of  immigration  doubtless  is  that  she  is  a  small 
country  with  relatively  limited  resources.  Migration  of  La- 
Only  the  great  size  and  the  vast  unde-  hour  tends  to- 
veloped  resources  of  the  United  States  ward  the  Equal- 
have  enabled  her  to  absorb  so  many  ^^^tion  of  Wages 
millions  of  immigrants  without  a  fall  in  wages  toward  the 
European  level.  It  is  hard  to  see  how  any  country, 
whether  socialistic  or  individualistic  in  its  industrial 
organization,  can  long  keep  its  advantage  over  other 
countries  without  some  restriction  of  immigration.  A 
thoroughgoing  experiment  in  collectivism,  therefore, 
could  not  be  made  under  favourable  conditions  in  New 
Zealand  or  any  other  country,  unless  that  country  were 
isolated  from  the  rest  of  the  world,  or  unless  the  whole 
world  made  the  same  experiment  at  the  same  time. 


CHAPTER   XVII 
GENERAL  SURVEY  AND  ESTIMATE  OF  RESULTS 

In  the  foregoing  chapters  an  account  has  been  given 
of  the  most  characteristic  activities  of  the  New  Zealand 
Government,  but  of  necessity  others  of 
Other  State          equal  importance  have  been  left  out.    A 
Activities  discussion  of  the  labour  laws  alone  would 

fill  a  volume,  and  another  volume  could 
be  made  about  the  inspection  of  meat,  the  grading  of 
butter  and  cheese,  and  other  methods  of  regulating 
industry  for  the  protection  of  consumers  and  the 
development  of  export  trade. 

The  Post  Office  would  repay  careful  study,  with  its 
parcels  post,  savings  bank,  telegraphs,  telephone  ex- 
changes, and  the  proposed  establishment 
The  Post  Office  of  wireless  telegraphy.  It  is  interesting 
to  note  that  the  rates  for  telegrams  are 
about  the  same  as  in  England  and  much  lower 
than  in  the  United  States,  and  that  the  charges  for 
telephone  service  also  are  very  low.  However,  the 
telegraphs  and  the  telephone  exchanges  are  operated  at  a 
loss,  although  the  Post  and  Telegraph  Department  as  a 
whole  earned  a  profit  of  £106,342  ($500,000)  in  the  year 
1908-09.  This  profit,  of  course,  would  be  much  reduced 
if  allowance  were  made  for  interest  on  the  cost  of  the 
buildings,  which  must  be  a  very  large  sum.  But  the 
Government  does  not  try  to  make  a  profit  out  of  the 
Post  Office,  and  the  Postmaster  General  said  in  his  Report 
for  1909: 

284 


SURVEY  AND   ESTIMATE  OF  RESULTS    285 

"  It  should  suffice,  if  the  public  is  being  well  served,  that  the 
Department  is  paying  its  way."  (Annual  Report  of  the  Post  and 
Telegraph  Department  for  the  year  1908-09.) 

Very  important  is  the  work  of  the  Advances  to  Settlers 
Office,  established  by  Act  of  Parliament  in  1894,  which 
has  lent  over  £8,000,000  ($40,000,000)  to 
farmers  at  five  per  cent,  interest,  has  Advances  to 
lost  practically  nothing,  and  earned  a  Settlers 
net  profit  of  £63,835  ($310,000)  in  the 
year  1908-09.  The  records  of  mortgages  registered  shows 
that  in  1895-96,  the  year  in  which  the  Advances  to 
to  Settlers  Office  began  operation,  70  per  cent,  of  the 
money  lent  on  mortgages  bore  interest  at  6  per  cent,  and 
over;  while  in  the  year  1907-08,  83  percent,  of  the  money 
lent  bore  interest  at  5  per  cent,  and  over,  and  only  35 
per  cent,  bore  interest  at  6  per  cent,  and  over.  The 
most  common  rate  of  interest  on  first  class  mortgages 
was  6  per  cent,  in  1895;  at  the  present  time  it  is  about 
5  per  cent.  (Year-Book,  1909,  p.  537.)  The  lending  of 
money  by  the  State  has  had  a  marked  effect  in  lowering 
the  rate  of  interest. 

In   the   year    1906,    the   Government   Advances   to 
Workers  Act  was  passed,  under  which  the  sum  of  £571,- 
210  ($2,800,000)  has  been  lent  to  work- 
ers at  4  1-2  and  5  per  cent,  interest,  which         Advances  to 
has   greatly   helped    them    in   acquiring         Workers 
homes.    The  net  profits  of  this  business 
for  the  year  1908-09  were  £3,757,  including  £1,552  set 
aside  as  a  sinking  fund.    (Year-Book,  1909,  p.  589.)     In 
the  year  1905,  the  Workers  Dwellings  Act  was  passed, 
providing  for  the  building  of  houses  for  workers,  to  be  let 
at  a  rental  of  equal  to  5  per  cent,  on  the  capital  cost,  plus 
insurance.    In  the  year  1909  there  were  in  the  four  cities 
105  of  these  houses,  usually  of  five  rooms,  with  bathroom 
and  scullery,  and  renting  at  from  gs.  ($2.25)  to  175:  6d. 


286      STATE  SOCIALISM  IN  NEW  ZEALAND 

($4.25)  a  week.  (Annual  Report  of  the  Department  of 
Labour,  1909,  p.  xv;  Scholefield,  New  Zealand  in  Evo- 
lution, p.  255.) 

Another  industry  in  which  the  State  is  engaged  is  the 
mining  and  selling  of  coal,  under  the  Coal  Mines  Act, 
1901.  The  price  of  coal  has  always  been 
State  Coal  high  in  New  Zealand ;  and  at  the  time  the 

Mines  Act  was  passed  it  was  exceptionally  high, 

owing  to  the  restriction  of  the  output 
in  New  South  Wales.  At  the  present  time  the  State 
operates  a  colliery  at  Point  Elizabeth  and  one  at  Seddon- 
ville.  In  the  year  1908,  the  total  amount  of  coal  raised 
in  New  Zealand  was  1,860,975  tons;  of  which  the  State 
mines  produced  234,250  tons,  some  of  which  was  used  by 
the  State  railways  and  the  rest  sold  at  depots  in  Welling- 
ton, Christchurch,Wanganui  and  Dunedin.  The  activity 
of  the  State  in  this  field  has  not  interfered  seriously 
with  private  enterprise,  although  it  may  have  discour- 
aged those  who  planned  to  open  new  mines,  especially 
as  the  State  has  reserved  some  of  the  richest  fields.  The 
production  of  coal  has  increased  considerably  since  1901, 
but  the  demand  also  has  increased  and  the  price  has  been 
well  maintained.  In  fact,  the  price  of  coal  is  higher  in 
most  places  than  it  was  in  1 899.  The  Government  claims 
to  have  earned  a  net  profit  of  nearly  £20,000  ($100,000) 
in  the  year  1908-09.  (Year-Book,  1909,  pp.  487,  591; 
Budget,  1909,  p.  ii.) 

Of  the  State  coal  mines,  advances  to  settlers,  lands 

for  settlements  and   the  purchase  of  native  lands,  Sir 

Joseph  Ward  says: 

"  The  profits  earned  on  these  State  reproductive  investments 
now  reach  nearly  £200,000  ($1,000,000)  after  payment  of  interest 
and  all  expenses,  and  are  increasing  rapidly  from  year  to  year.  In 
addition  to  this,  very  beneficial  results  accrue  in  the  reduction  of 
expenses  and  cost  of  living  to  the  general  public.  It  was  not  intended 
that   these   investments  should   reduce   rates  to  what   would  be  a 


SURVEY  AiND  ESTIMATE  OF  RESULTS    287 

ruinous  competition  with  private  traders  and  investors.  The  object 
was  to  maintain  a  fair  and  reasonable  average  in  order  that  the 
public  may  benefit  by  obtaining  money,  coal  and  land  at  reasonable 
rates,  which  may  be  said  to  have  now  reached  the  minimum." 
(Budget,  1909,  p.  ii.) 

In  this  statement  Sir  Joseph  Ward  lays  clown  the 
fundamental  principle  of  fair  competition  between  State 

and  private  enterprise ;  and  if  the  Govern- 
Fair  ment  will  adhere  to  this,  private  traders 
Competition        and  investors  will  have  little  to  fear  from 

State    competition.      The    competition 

between  the  State  Fire  Insurance  Office  and  the  private 

companies  has  been  unfair,  because  the  rates  have  been 

so  low  that  proper  reserves  could  not  be  built  up;   but 

competition  in  life  insurance  has  usually  been  quite  fair, 

and  private  companies  have  done  even  more  than  their 

share  of  the  business.    The  principles  of  fair  competition 

are  not  well  understood,  and  it  is  impossible  to  lay  down 

definite  rules;  but  any  private  business  that  is  to  continue 

to  exist  must  earn  enough  to  pay  running  expenses  and 

interest  on  borrowed  capital,  to  provide  reserves  against 

depreciation  and  loss,  and  to  pay  off  its  debts  at  the 

proper  time.    It  is  probable,  too,  that  there  should  be  net 

profits,  to  be  used  in  extending  the  business  or  in  other 

investments,    that    private    capital    may    increase    and 

industrial  development  continue.    If  the  State  can  do  all 

these  things  and  still  produce  more  cheaply  than  private 

capitalists,   there  is   nothing   to  be  said   against  State 

ownership,  and  the  sooner  the  State  takes  over  every 

kind  of  business  the  better  it  will  be  for  ev^erybody. 

But  the  experience  of  New  Zealand 

..   ®  shows    that    when   the    State   conducts 

Government      ,       .  ,     _  .   ,         .      .    , 

Stroke "  busmess  on  sound    financial    prmciples, 

private  enterprise  can  more  than  hold 

its  own.     The  State  has  an  advantage  in  that  it  can 


288      STATE  SOCIALISM  IN  NEW  ZEALAND 

borrow  at  low  rates  of  interest,  but  in  regard  to 
efficiency  of  management  the  advantage  is  on  the  side 
of  private  business.    As  Dr.  Clark  says: 

"  Men  do  not  work  as  well  for  the  State  as  for  private  employers 
Nothing  illustrates  the  last  fact  more  significantly  than  that  the 
usual  term  among  Australasians  for  an  easy-going  pace  of  work  is 
"  the  Government  stroke."  ("  The  Labour  Movement  in  Austra- 
lasia," p.  286.) 

The  carrying  on  of  public  enterprises  at  a  loss  is 

frequently  defended,  because  people  think  more  of  the 

utility  or  service  which  the  State  renders 

J*l,  .^"       ^'^^    than  of  the  cost  of  that  service:  but  the 
of  Public  ... 

Business  opmion  is  steadily  gaining  ground  that 

all  the  business  operations  of  the  State 
should  be  conducted  on  business  principles,  actuarially 
sound,  as  insurance  men  say.  It  is  important  that  this 
should  be  done  when  the  State  is  competing  with  private 
enterprise,  as  in  banking,  insurance  and  the  mining  and 
selling  of  coal;  but  it  is  even  more  important  that 
sound  business  principles  should  govern  the  management 
of  the  Post  Office,  the  railways  and  other  State  monopo- 
lies, where  there  is  no  private  competition  to  act  as  a 
check  upon  costly  management,  obsolete  methods  and 
unreasonable  concessions  to  popular  clamor. 

The  Government  recently  adopted  the  policy  of  mak- 
ing the  railways  pay  at  least  interest  on  their  capital  cost, 

and  will  probably  soon  set  aside  a  portion 
Sinking  Funds    of    the    net    income    for    the    ultimate 

extinction  of  the  railway  debt.  In 
his  great  speech  at  Winton,  Sir  Joseph  Ward  said: 

"  As  the  outcome  of  the  various  undertakings  that  the  Govern- 
ment carry  out  for  the  people,  it  seems  to  me,  after  careful  con- 
sideration, that  the  question  of  the  provision  of  sinking  funds  for 
the  paying  off  of  our  loans  should  be  dealt  with  upon  a  comprehen- 
sive and  sound  basis."     {The  Otago  Daily  Times,  May  6,  191Q.) 


SURVEY  AND  ESTIMATE  OF  RESULTS    289 

There  are  many  who  think  that  the  time  of  borrowing 
should  come  to  an  end  and  that  the  time  of 
paying  should  begin.  The  Dominion  would  surely  be 
in  a  better  position  if  it  were  no  longer 
a  debtor  nation  and  if  the  whole  revenue  Public  Saving 
could  be  used  for  developmental  pur- 
poses, instead  of  being  sent  abroad  to  foreign  money 
lenders.  Private  capital  is  derived  from  saving,  from  a 
surplus  of  revenue  over  expenditure,  and  there  can  be  no 
good  reason  why  public  capital  should  not  be  accumu- 
lated in  the  same  way.  Indeed,  if  New  Zealand  ever 
became  a  socialistic  State,  it  would  have  to  establish  new 
industries  out  of  the  accumulated  profits  of  the  old; 
for  it  would  be  monstrous,  if  not  impossible,  to  mortgage 
the  country  to  private  capitalists. 

At  the  present  time  only  a  few  industries  are  carried 
on  by  the  State,  but  the  same  financial  principles  apply 
as    if    the   State   owned    and    managed 
everything.     If  the  State  industries  are        usmess 
carried  on  at  a  loss,  there  is  a  loss  to  the      charity 
people  as  a  whole,  or  else  some  of  the 
people  are  being  taxed  for  the  sake  of  others,  and  these 
not  the  poor  who  need  charity,  but  people  who  can  well 
afford  to  pay  for  all  that  they  receive.    There  should  be 
separate  accounts  for  business  and  for  charity,  else  there 
may  be  no  profit  in  business  and  nothing  to  be  given 
in  the  way  of  charity. 

But  although  the  New  Zealand  Government  has  bor- 
rowed enormous  sums,  has  entered  into  competition  with 
private  capitalists,  has  carried  on  some 

enterprises  at  a  loss,  and  has  made  great  ^     overn- 

,       ,   ,         .  ,  ,  ment  not 

concessions  to  the  labouring  class,   the      Bankruot 

prophecies  of  those  who  looked  for  dis- 
aster and  bankruptcy  have  not  been  fulfilled.     On  the 


290     STATE  SOCIALISM  IN  NEW  ZEALAND 

contrary,  the  period  of  prosperity  which  began  about  the 
year  1896  has  lasted,  with  only  a  single  break,  until  the 
present  time. 

The  industrial  depression  that  began  in  the  United 
States  in  1907  spread  to  New  Zealand,  caused  a  good  deal 
of  trouble  in  the  winter  of  1908,  and  still 
Crises  of  more  in  the  winter  of  1909,  when  business 

1908-09  was  very  dull  and  there  was  much  dis- 

tress in  the  large  towns.  The  chief 
cause  of  the  depression  was  the  decline  in  the  value  of  the 
exports  from  £20,061,641,  in  1907,  to  £16,075,205,  in 
1908.  (Year-Book,  1909,  p.  300.)  The  worst  feature  of 
the  situation  was  the  low  price  of  frozen  mutton,  which 
fell  as  low  as  2  11 -16  <£.  (5  3-8  c.)  in  August,  1909,  on  the 
London  wholesale  market.  But  the  price  of  wool  was 
higher  in  1909  than  in  the  preceding  year;  the  clip  was 
large ;  and  the  Dominion  gained  on  wool  far  more  than  it 
lost  on  mutton.  Also,  the  price  of  mutton  rose  before  the 
end  of  the  year,  and  the  total  value  of  the  exports  for  the 
year  ending  March  31,  1910,  exceeded  £21,000,000 
($105,000,000) .  Another  important  factor  in  the  restora- 
tion of  confidence  was  the  ability  of  the  Government  to 
borrow  large  sums  at  from  31-2  to  4  per  cent,  interest. 
New  Zealand  suffered  less  from  the  depression  than  either 
England  or  the  United  States;  made  a  more  rapid  recov- 
ery; and,  provided  that  the  prices  of  wool,  mutton  and 
dairy  produce  remain  high,  is  likely  to  enjoy  another 
series  of  good  years. 

The  prosperity  of  New  Zealand  since  the  Liberal 

Party  came  into  power  may  be  measured  in  various 

ways.     From  the  year  1891  to  the  year 

osperity  o         jgoS,    the    population    increased    from 

634,058      to     960,642;      the    combined 

value    of    imports    and    exports    from    £15,903,945    to 


SURVEY  AND  ESTIMATE  OF  RESULTS    291 

£33,365,814;  the  bank  deposits  from  £12,796,098  to 
£21,821,753;  savings-bank  deposits  from  £3,406,949  to 
£13,512,266;  the  capital  vakie  of  land  from  £122,225,- 
029  to  £253,440,172;  the  public  debt  from  £38,830,350 
to  £70,938,534.  ("Fifty  Years  of  Progress  in  New  Zea- 
land," Year-Book,  1909,  pp.  637-649.)  But  probably  the 
best  measure  of  prosperity  is  afforded  by  the  statistics  of 
total  and  per  capita  wealth,  which,  although  not  quite 
satisfactory,  are  very  useful  for  purposes  of  comparison. 

These  statistics  have  been  compiled  from  the  probate 
returns  of  estates  of  deceased  persons,  which  give  the 
average  amount  left  by  each  person, 
from  which  may  be  estimated  the  wealth  Average  Wealth 
of  the  living  by  assuming  that  the 
average  wealth  of  livnng  adults  is  the  same  as 
that  of  those  who  die.  The  estimate  is  probably  too 
high,  because  of  the  fact  that  the  average  wealth  of 
those  who  die  is  probably  greater  than  that  of  the  living, 
many  of  whom  are  young  persons  who  have  not  yet 
accumulated  much  property.  On  the  other  hand,  there 
is  no  record  of  the  number  and  value  of  estates  left  to 
husband  or  wife  of  the  deceased,  as  these  are  not  dutiable. 
Again,  there  is  probably  a  certain  amount  of  undervalu- 
ation of  estates  for  the  purpose  of  escaping  taxation. 

According  to  this  method,  the  total  private  wealth  of 
New  Zealand  in  1891  was  estimated  at  £145,780,504, 
being  an  average  of  £230  ($1,150)  per  head  of  the  popu- 
lation, excluding  Maoris.  In  the  year  1906,  the  last  year 
for  which  this  calculation  was  made,  the  total  private 
wealth  was  estimated  at  £304,654,000,  and  the  wealth  per 
head  at  £335  ($1,675).  However,  this  estimate  is  prob- 
ably too  high,  because  of  the  probating  of  some  excep- 
tionally large  estates,  and  the  estimate  for  1905  seems  to 
be  more  accurate,  which  gives  the  total  private  wealth 


292      STATE  SOCIALISM  IN  NEW  ZEALAND 

as   £258,710,000,    and    the   weallh    per   head    as   £293 
($1,465).     (Year-Book,  1908,  p.  537.) 

The  method  of  estimating  private  wealth  by  the  pro- 
bate returns  has  been  abandoned  as  unsatisfactory,  and 
in  the  Budget  for  1909  an  estimate  is  given  based  on 
totally  different  principles.  The  total  wealth  of  the 
Dominion  is  given  as  £511,056,384,  being  about  £500 
($2,500)  per  head  of  the  population,  and  the  figures  are 
compared  with  those  of  1891,  which  were  compiled  ac- 
cording to  the  discarded  method.  The  figures  them- 
selves are  quite  erroneous  and  the  comparison  with  pre- 
vious years  is  altogether  misleading.     (Budget,  1909,  p. 

iii.) 

It  is  not  necessary,  even  for  political  purposes,  to  give 

an  exaggerated  estimate  of  the  wealth  of  New  Zealand. 

Taking   the   wealth   per  head   at   £335 

wl'th  OthTr"  (^^'675),   as  in   1906,  or  even  at  £293 

witn  Otner  /m-       ^   \  •  tvt        ^     1       1  1 

Countries  ($1,465).  as  m  1 905,  New  Zealand  has  a 

greater  wealth  per  head  than  any  other 

country  in  the  world.     Mulhall's  estimate  for  1896 gives 

the  wealth  per  capita  of  the  United  Kingdom  as  $1,455 

(£291);    France  $1,228  (£245);   Germany,  $751  (£150) ; 

Canada,  $957  (£191);  Australia,  $1,247  (£249).    The  per 

capita  wealth  of  the  United  States,  in  1904,  according  to 

the  Census  Report,  was  $1,318  (£263).    The  average  for 

the  United  States  is  brought  down  by  the  low  average  for 

the  Southern  states.      The  wealth   per  capita  of   the 

Northern  states  is  greater  than  the  average.     New  York, 

for  example,   has  wealth   per  capita  of  $1,867  (£373) 

Minnesota,    $1,728    (£345);     Illinois,    $1,689    (£337) 

Nebraska,    $1,882    (£376);      Colorado,    $2,045    (£409) 

California,  $2,582  (£516).    (Special  Report  of  the  Census 

Office   on   Wealth,    Debt,    and   Taxation,   Washington, 

1907.)    All  such  comparisons,  however,  are  more  or  less 


SURVEY  AND   ESTIMATE  OF  RESULTS    293 

misleading,  because  of  the  various  methods  by  which  the 

estimates  are  made. 

The  Liberal  Party  naturally  claims  much  credit  for 

the  prosperity  which   New  Zealand  has  enjoyed  during 

the  past  fifteen  years,  but  the  basis  of 

this  prosperity  has  been  economic  rather  Economic  Basis 

than    political    in    its    character.      The  of  Prosperity 

natural  resources  of  the  Dominion,  when 

compared  with  the  population,  are  very  great.    There  are 

only  a  million  people  in  a  country  as  large  as  Great 

Britain  and  half  of  Ireland,  with  abundance  of  good  land, 

a  fine  climate,  and  an  excellent  market  for  all  the  staple 

products.    Before  the  days  of  refrigeration,  small  farming 

was  not  profitable,  except  in  the  vicinity  of  the  towns; 

and  even  sheep  raising  on  a   large  scale  was  a  precarious 

business,  depending  for  its  profits  on  the  price  of  wool 

alone.      But    the    refrigerator    has    revolutionized    the 

sheep-raising  industry;  has  built  up  a  large  export  trade 

in   dairy   products;  and   has  done   far   more   for   New 

Zealand  than   all   the   legislation   of    the    past    twenty 

years.     Mr.  Scholefield  says: 

"  Refrigeration  was  the  salvation  of  New  Zealand.  At  a  time 
when  the  colony  was  in  the  lowest  state  of  depression  in  its  history, 
when  the  labour  market  was  glutted  with  unemployed,  and  the  agri- 
cultural classes  were  disheartened  for  lack  of  markets,  it  gave  birth 
to  two  industries  which  rejuvenated  the  country  population  and 
absorbed  some  of  the  surplus  of  the  cities;  which  gave  an  impetus  to 
the  genuine  settlement  of  the  land  by  small  men  able  to  work  it,  and 
which  brought  into  the  country  during  the  worst  period  of  its  depres- 
sion nine  millions  sterling  of  absolutely  new  revenue."  ("  New 
Zealand  in  Evolution,"  London,  1909,  p.  131.) 

And  yet  it  cannot  be  denied  that  large  landholders  fre- 
quently stood  in  the  way  of  closer  settlement;  and  that 
the  efforts  of  the  Government  to  break 
up  the  great  estates  and  to  help  the  small    Land  Reform 
farmers   in    every    way    have    made    it 
possible    for    many    people    to    live    where    few    lived 


294      state:  socialism  in  new  ZEALAND 

before,  and  have  added  not  a  little  to  the  population 
and  wealth  of  the  Dominion,  Even  the  much  criticised 
borrowing  for  roads  and  railways,  while  it  involved  the 
taking  of  a  great  risk,  has  proved  to  be  a  good  investment ; 
for  the  country  has  been  rapidly  developed  and  wealth 
has  increased  much  more  rapidly  than  the  public  debt. 

It  is  not  so  easy  to  show  that  the  labour  legislation, 
with  the  possible  exception  of  the    Arbitration  Act,  has 

added  to  the  prosperity  of  the  country. 
Labour  Labour   legislation   is   a   luxury   that   a 

Legislation  rich  country  can  afford;  and  it  may  be 

hoped  that  it  will,  in  the  end,  increase 
industrial  efficiency  as  well  as  improve  the  condition  of 
the  working  class,  and  thus  promote  the  greatest  happi- 
ness of  the  greatest  number. 

As    to    State    insurance.    State    ownership    of    coal 
mines,   and  other  forms  of  State  trading,   while   their 

utility  is  questionable,  they  cannot  be 
State  Trading      shown  to  have  done  much  harm;  and  if 

in  the  future  they  are  conducted  on 
sound  financial  principles  they  will  not  drive  private 
enterprise  from  the  field,  but  will  do  only  a  part 
of  the  business  and  operate  as  a  check  upon  the  fixing  of 
extortionate  prices  by  private  combinations  of  capitalists. 
The  only  danger  is  that  the  Government,  under  pressure 
of  public  opinion,  may  sell  products  and  services  at  less 
than  cost,  ruin  private  business  and  establish  monopolies 
in  these  and  other  fields  of  production.  But  the  Govern- 
ment cannot  afford  to  carry  on  business  at  a  loss,  and 
there  is  no  general  demand  for  the  further  extension  of 
governmental  functions;  for  many  people  think  that  it 
would  be  well  to  wait  until  the  success  of  the  various 
State  experiments  is  assured  before  trying  any  more. 
Mr.  Scholefield  says: 


SURVEY  AND  ESTIMATE  OF  RESULTS    295 

"  Of  late  years  the  whole  tendency  has  been  to  leave  more  and 
more  to  private  enterprise.  It  is  a  swing  of  the  pendulum.  Ten 
years  ago  the  Government  would  not  have  dared  to  suggest  allowing 
private  companies  to  develop  the  great  assets  latent  in  the  energy  of 
the  rivers  of  New  Zealand.  To-day  it  is  the  avowed  policy  of  the 
State  to  encourage  private  enterprise  in  this  direction.  It  is  highly 
improbable  now  that  New  Zealand  will  make  any  further  pronounced 
advance  towards  State  Socialism  until  a  new  temper  succeeds  to  the 
present  mood  of  conservative  Liberalism."  ("  New  Zealand  in 
Evolution,"  p.  25CJ.) 

From  the  merely  scientific  point  of  view,  it  is  a  pity  that 
the  Dominion  is  not  willing  to  try  experiments  even  more 
radical  than  those  of  the  past  few  years. 
Having  become  the  sociological  experi-      Social 
ment  station  of  the  world,  she  is  rather      Experiments 
expected  to  go  on  with  the  work  without 
too  much  regard  for  her  own  welfare  and  convenience, 
to  practise  a  little  more  vivisection  for  the  benefit  of 
humanity.     The  conditions  are  exceedingly  favourable: 
the  country  is  remote,  with  a  small  and  homogeneous 
population ;  the  people  are  intelligent  and  well  educated 
and  have  a  high  standard  of   public  virtue;    the  soil  is 
fertile,  the  climate  healthful;    surely  here,  if  anywhere, 
the  ideals  of  Utopia  could  be  realized. 

But  the  people  of  New  Zealand  do  not  take  this  very 
altruistic  point  of  view.  In  all  their  legislation  they  have 
in  mind  their  own  benefit;  and  when  they  think  that 
their  experiments  have  gone  far  enough,  they  will  stop, 
regardless  of  the  wishes  of  people  in  other  parts  of  the 
world.  Besides,  the  legislation  of  New  Zealand  is  not 
to  be  regarded  as  merely  experimental  in  its  character, 
but  as  arising  from  a  conflict  of  interests  and  a  series  of 
compromises,  resulting  in  conditions  from  which  the 
people  could  not  altogether  recede  even  if  they  wished 
to  do  so. 

Among  these  permanent  conditions  the  most  import- 
ant is  the  State  itself,  which  has  increased  enormously 


296      STATE  SOCIALISM  IN  NEW  ZEALAND 

in  power  since  the  Liberals  came  into  office  in  1891. 
In  fact,  one  reason  why  the  Liberal  Party  has  remained 

in  power  so  long  is  that  it  has  had 
Power  of  the  ^     1        r  •  •  u  r 

„^  ^  control     01    an    mcreasmg    number    01 

State  ,  ,         .         ^  . 

departments  and  an  mcreasmg  expendi- 
ture of  money  derived  from  taxation  and  loans.  Mr. 
Seddon  well  understood  the  political  effects  of  making 
the  State  the  dominant  economic  power  in  the  Colony; 
and  knew  how  to  strengthen  his  Government  by  widening 
the  scope  of  its  activities,  by  a  shrewd  expenditure  of 
money,  chiefly  in  the  building  of  roads  and  railways,  and 
by  a  judicious  distribution  of  favours  of  every  kind.  He 
taught  the  people  in  every  part  of  the  Colony  to  "  stand 
in  "  with  the  Government  if  they  wished  to  be  remem- 
bered in  the  distribution  of  loaves  and  fishes. 

Already  there  are  more  than  54,000  persons  in  the 
pay  of  the  State;  who,  with  their  families,  number  at 

least  130,000  persons  directly  dependent 
Power  of  the  on  the  State,  and  the  number  of  persons 
Public  Servants  indirectly  dependent  on  the  State  must 

be  very  great.  The  public  servants  are 
regarded  as  servants  of  the  people,  and  are  partially  dis- 
franchised in  that  they  are  not  allowed  to  take  an  active 
part  in  politics;  but  their  political  power,  exercised 
in  a  quiet  way,  is  very  great,  and  must  increase  as  the 
functions  of  the  State  increase.  It  is  clear  that  state 
socialism  in  a  country  like  New  Zealand,  with  so  much 
centralization  of  power,  could  mean  nothing  else  than 
government  by  a  bureaucracy. 

Tendency  ^^  may  be  thought  that  government 

toward  by  a  bureaucracy  is  the  same  as  gov- 

Bureaucratic  ernment  by  the  people,  since  the  public 
Government  servants  belong  to  Departments  which 
are  controlled    by  cabinet  ministers  who  are  elected  by 


SURVEY  AND  ESTIMATE  OF  RESULTS    297 

the  people;  but  the  departments  are  not  altogether 
controlled  by  the  ministers  in  charge,  nor  even  by  the  chief 
officials,  but  by  a  sort  of  custom  which  in  the  expression 
of  the  will  of  the  public  servants  as  a  body,  who  regard 
first  of  all  their  own  interests,  and,  secondly,  the  interests 
of  the  people  whom  they  serve.  A  department  at  first 
exists  for  the  performance  of  some  public  service ;  but  after 
a  time  it  comes  to  exist  for  its  own  sake,  and  the  service 
which  it  performs  is  quite  a  secondary  matter.  Indeed, 
if  a  department  ceased  to  perform  any  public  service 
whatever,  it  would  continue  to  exist  as  an  organization; 
its  members  would  draw  pay  and  receive  promotion; 
and  only  a  most  unusual  outburst  of  public  indignation, 
or  the  stress  of  financial  embarrassment,  could  get  rid  of 
such  a  vestigiary  and  parasitic  organ,  whose  usefulness 
had  long  since  passed  away. 

At  the  present  time  there  is  a  tendency  toward  decen- 
tralization, which  must  be  regarded  as  making  for 
greater  economy  in  expenditure  and  a  Tendency 
greater  degree  of  individual  liberty.  toward 
The  more  closely  settled  parts  of  the  Decentraliza- 
Dominion  are  becoming  more  independ-  ^*°" 
ent  of  the  general  Government,  more  inclined  to  take 
charge  of  their  own  affairs,  and  less  disposed  to  favour 
extravagant  expenditure  of  public  funds  on  roads  and 
railways  for  the  less  settled  districts.  The  Government 
has  gone  so  far  as  to  ask  districts  needing  railways  to 
guarantee  at  least  31-2  per  cent,  upon  the  capital  cost. 
It  has  been  proposed  that  more  authority  be  given  to  the 
School  Committees,  and  that  the  Government  no  longer 
pay  the  whole  cost  of  public  instruction,  but  give  pound 
for  pound  against  money  raised  by  local  taxation.  In  the 
settlement  of  industrial  disputes  the  tendency  is  toward 
conciliation   by   local   councils   of  experts  rather   than 


298      STATE  SOCIALISM  IN  NEW  ZEALAND 

arbitration  by  a  single  court  for  the  whole  Dominion.  In 
brief,  it  is  coming  to  be  recognized  that  the  State,  the 
local  governing  bodies,  and  the  individual  have  their 
proper  spheres  of  activity,  within  which  they  must  be 
allowed  to  work,  if  liberty  is  to  be  preserved  and  the 
greatest  possible  social  welfare  is  to  be  secured. 

The  word  "development"  has  been  the  key  note 
of  State  activity  since  the  time  of  Vogel.    The  State  has 

been  in  the  position  of  a  landlord  with  a 
Development  vast  estate  awaiting  development, — a 
Accelerated  development  which   would    have    come 

sooner  or  later  through  private  effort, 
but  which  has  been  hastened  by  the  borrowing  of  large 
sums  for  the  building  of  roads  and  railways,  for  the  pur- 
chase and  division  of  large  estates,  for  loans  to  settlers,  i 
for  the  encouragement  of  immigration,  and  for  building! 
up  the  great  primary  industries  of  the  Colony.  This  has 
been  an  agrarian  policy  throughout,  with  the  interests 
of  the  small  farmer  predominant.  The  labour  legislation 
may  be  regarded  as  an  attempt  to  divide  the  profits  of 
development  w^ith  the  labouring  class,  while  the  various 
experiments  in  State  trading  have  been  undertaken  for 
the  sake  of  reducing  the  cost  of  living  and  preventing 
the  growth  of  oppressive  monopolies.  The  policy  of  the 
Government  may  be  open  to  criticism  at  many  points ;  but 
development  has  been  secured,  and  the  Premier  has  every 
right  to  point  with  pride  to  statistics  showing  a  rapid 
increase  in  population,  foreign  trade,  land  values,  total 
and  per  capita  wealth,  and  material  prosperity  of  every 
kind.  (Budget,  1909;  Speech  of  Sir  Joseph  Ward  at 
Winton,  May  5,  1910.) 

But  statistics  of  total  and  per  capita  wealth  do  not 
give  an  adequate  idea  of  the  prosperity  of  the 
mass  of  the  people,  since  they  throw  no  light  on  the 


SURVEY  AND  ESTIMATE  OF  RESULTS    299 

question  of  the  distribution  of  tiiat  wealth.    Some  years 

ago  statistics  were  collected  by  the  late  Dr.  C.  B.  Spahr 

from  the  probate  court  records  of  certain 

,        „  r    ,.         IT     1        Distribution 

counties    m    the    State  01    JNcw    York,       ,  YVealth 

showing  that  about  one  per  cent,  of  the 
families  owned  fully  one  half  of  the  total  w^ealth.  Spahr 
considered  that  these  counties  were  typical  of  the  country 
as  a  whole;  and  while  he  may  have  been  mistaken  in  this, 
it  is  certain  that  in  every  part  of  the  country  a  small 
minority  of  the  people  own  a  large  part  of  the  wealth. 
This  condition  is  not  peculiar  to  the  United  States,  but 
obtains  to  a  greater  or  less  extent  in  all  the  countries  of 
Europe,  and  even  Australia  and  New  Zealand  are  not 
exceptions  to  the  general  rule.  ("  The  Present  Distribu- 
tion of  wealth  in  the  United  States,"  by  C.  B.  Spahr, 
New  York,  1896.) 

It  is  often  said  that  there  are  no  millionaires  and  no 
paupers  in  New  Zealand,  but  such  a  statement  must  not 
be  taken  literally.    There  appears  to  be 
as  much  poverty  in  the  cities  of  New    Millionaires  in 
Zealand  as  in  cities  of  the  same  size  in     New  Zealand 
the  United  States,  and  as  many  people 
of  large  wealth.    It  is  probable  that  no  one  person  in  New 
Zealand  owns  as  much  as  a  million  pounds,  or  five  million 
dollars,  but  there  are  a  good  many  who  are  millionaires 
in  the  American  sense  of  that  word.     The  late  Jacob 
Joseph  left  a  fortune  of  about  £300,000  ($1 ,500,000) ;  the 
late  Archdeacon  Williams  left  about  £420,000  ($2,100,- 
000) ;    and  the  late   Hon.  W.  W.  Johnston   left  about 
£500,000  ($2,500,000). 

Through  the  courtesy  of  Mr.  George 

Laurenson,  M.  H.  R.,  and  Mr.   C.  A.    ^^^^''IT''''' 

...  of  Wealth 

Hickson,  Commissioner  of  Stamps,   the 

writers  have   obtained   an   interesting  return    showing 


300      STATE  SOCIALISM  IN  NEW  ZEALAND 

the  number  and  value  of  the  estates  of  deceavsed 
persons  for  the  years  1903  and  1904.  In  those  years 
about  10,000  adults  died,  of  whom  2,609  left  dutiable 
estates.  The  total  amount  left  was  about  £6,000,000, 
but  20  persons  left  property  valued  at  £2,000,000;  that 
is  to  say,  one  fifth  of  one  per  cent,  of  the  adults  who  died 
owned  one  third  of  the  wealth.  If  we  assume  that  the 
wealth  of  living  adults,  numbering  about  500,000,  is 
distributed  in  the  same  manner  as  the  wealth  of  those  who 
die,  which  is  the  assumption  made  by  Spahr,  we  arrive 
at  the  conclusion  that  about  i  ,000  persons  owned  33  per 
cent,  of  the  wealth  of  New  Zealand.  But  there  were 
at  that  time  approximately  180,000  families  in  New 
Zealand,  allowing,  as  Spahr  does,  an  average  of  5  persons 
to  a  family;  the  conclusion,  therefore,  is  that  about  one 
half  of  one  per  cent,  of  the  families  owned  33  per  cent,  of 
the  total  wealth. 

But  the  figures  for  the  years  1903  and  1904  show  an 
unusual  concentration  of  wealth,  as  compared  with  the 
statistics  given  in  the  Year-Books  from  1895  to  1903. 
Perhaps  some  unusually  large  estates  were  probated  in 
the  later  years.  An  average  for  the  years  1895  to  1897 
shows  that  about  nine  tenths  of  I  per  cent,  of  the  fam- 
ilies owned  38  per  cent,  of  the  wealth;  the  average  for 
1898  to  1900  shows  that  seven  tenths  of  i  per  cent,  of  the 
families  owned  30  per  cent,  of  the  wealth;  and  the  aver- 
age for  1 90 1  to  1903  shows  that  about  i  per  cent,  of  the 
families  owned  about  35  per  cent,  of  the  total  wealth. 

One  would  think  that  the  graduated  taxes  on  land 

and  the  division  of  the  great  estates  would  have  had  a 

marked  effect  in  equalizing  the  distribu- 

„      ^.  tion  of  wealth,  but  such  has  not  been 

Taxation  .      ,  ,         1      r 

the  case  as  yet;  as  is  shown  by  the  tact 

that     from    1893    to     1903,    three     tenths    of     i     per 


SURVEY  AND  ESTIMATE  OF  RESULTS    301 

cent,  of  the  adults  who  died  left  35  per  cent,  of  the 
value  of  the  property  left;  while  from  1904  to  1907, 
about  four  tenths  of  one  per  cent,  of  the  adults  who  died 
left  about  41  per  cent,  of  the  total  value.  (Year-Book, 
1909,  p.  542;  Year-Books,  1895  to  1904.)  In  both  cases 
the  average  value  of  the  largest  estates  was  about 
£50,000  ($250,000).  It  is  interesting  to  note  that  the 
average  wealth  of  the  125,000  richest  families  in  the 
United  States,  as  given  by  Spahr,  was  $264,000  (£53,000) . 
In  Australia,  wealth  seems  to  be  more  unequally  dis- 
tributed than  it  is  in  New  Zealand.  According  to  statis- 
tics given  in  the  Official  Year-Book  of 

New  South  Wales  for   1904-05,  about    SJ''^'."''''''  "*' 

,  ,  ^       ,       ,  Wealth  in 

1,000    persons    own  wealth    valued    at    Australia 

£130,000,000,  making  an  average  of 
£130,000  ($650,000).  These  persons  represent  about 
four  tenths  of  i  per  cent,  of  the  families  of  New  South 
Wales,  and  their  combined  fortunes  amount  to  about  35 
per  cent,  of  the  total  private  wealth  of  that  State.  Prob- 
ably half  of  the  entire  private  property  is  in  the  hands  of 
not  more  than  3,000  persons.  (The  Official  Year-Book 
of  New  South  Wales,  1904-05,  p.  543.) 

While  a  large  part  of  the  private  wealth  of  New 
Zealand  is  owned  by  a  few  persons,  there  is  a  large  class 
of  people  in  comfortable  circumstances, 
and  a  large  proportion  of  the  families    Many  Owners 
own  property  of  one  kind  or  another,    of  Property 
The  probate  statistics  show  that  about 
63  per  cent,  of  the  families  own  property  valued  at  £100 
($500)  or  over,  and  it  is  probable  that  75  per  cent,  of  the 
families  are  in  this  class,  for  a  good  many  small  estates 
escape  taxation.    Also,  of  the  people  classed  as  proper- 
tyless,  many  are  young,  industrious,  and  well-paid  wage- 
earners  ;  who,  if  they  have  good  health  and  good  luck,  may 


302      STATE  SOCIALISM  IN  NEW  ZEALAND 

yet  acquire  a  competency,  for  the  opportunities  for  ad- 
vancement in  a  country  so  prosperous  as  New  Zealand 
must  be   unusually  great. 

And  yet,  there  is  a  large  number  of  unsuccessful  and 
discontented  people;  who  have  accumulated  little  or  no 

property,  have  no  source  of  income 
The  other  than  the  labour  of  their  hands  and 

Propertyless         no  hope  for  their  declining  years  but  the 

prospect  of  a  grudging  assistance  from 
their  children  and  a  small  pension  from  the  State.  There 
were  relatively  more  of  this  class  of  people  in  the  early 
nineties  than  there  are  to-day,  but  many  of  them  ac- 
quired land  and  other  property,  and  are  now  successful 
and  contented.  The  land  legislation  of  the  Liberal 
Government  was  socialistic,  in  a  sense;  but  its  effects 
were  anything  but  socialistic,  for  it  converted  land  hun- 
gry labourers  into  prosperous  farmers,  strong  supporters 
of  the  freehold  and  the  sanctity  of  private  property. 

It  must  be  admitted  that  the  benefits  of  land  reform 
and  other  Liberal  legislation  have  accrued  chiefly  to  the 

owners  of  land  and  other  forms  of  prop- 
Wages  in  ^  ^^^    ^j^^^   ^j^g    condition   of    the 
Relation  to            ,       ,,  ,  , 
Immigration        landless  and  propertyless  wage  earners 

has  not  been  much  improved.  Indeed, 
wages  could  not  rise  much  without  causing  immigration 
from  Australia,  Great  Britain  and  other  countries, 
which  would  bring  wages  down  again,  for  the  labour 
market  of  New  Zealand  could  not  absorb  a  very 
large  number  of  immigrants  in  any  one  year.  The 
Government  has  done  what  it  could  to  improve  the 
conditions  of  labour,  and  to  provide  opportunities  for 
acquiring  property;  that  the  more  capable,  industrious 
and  frugal  might  raise  themselves  to  a  condition  of  inde- 
pendence which  they  could  never  attain  while  they  re- 


SURVEY  AND  ESTIMATE  OF  RESULTS    303 

mained  mere  wage  earners,  living  from  hand  to  mouth 
and  making  no  provision  for  the  future. 

There  is  still  a  good  deal  of  land  to  be  had  at  rea- 
sonable prices,  especially  in  the  back  blocks,  and  the 
Government  makes  loans  to  settlers  and 
workers   at   low   rates   of   interest;  but  A  Discontented 
these  opportunities  are  open  only  to  those  Class 
who  have  saved  something  and  are  able 
and  willing  to  help  themselves.     But  there  is  a  class  of 
labourers  to  whom  this  old-fashioned  way  of  getting 
ahead  does  not  appeal;  who  think  that  the  Government 
should  provide  some  royal  road  to  fortune;  and  applaud 
the  single-taxers  who  tell  them  that  every  inhabitant  of 
the  Dominion  has  a  natural  right  to  a  share  in  the  land, 
and  the  socialists  who  say  that  labour  should  receive, 
not  only  wages,  but  the  whole  product  of  capital  accu- 
mulated by  others. 

At  the  annual  Conference  of  the  Trades  and  Labour 
Councils  of  New  Zealand,  held  in  Wellington  in  October, 
1909,  Mr.  T.  O'Bryne  moved:     "That    Proposed  For- 
the    time    has    now  arrived   when    the     mation  of  an 
Trades    and     Labour    Councils    should     Independent 
take  definite  action  in  endeavouring  to    Labour  Party 
return  Labour  members  to  Parliament."     In  discussing 
this  motion  Mr.  O'Byrne  said  that  the  Labour  Party 
had  been  dragged  at  the  heels  of  the  Liberal  Party  long 
enough,  and  that  the  time  was  ripe  for  the  formation  of 
an  Independent  Labour  Party.    Mr.  Hart  said  that  the 
workers  would  have  got  more  concessions  from  the  Con- 
servative Party.    Mr.  Horning  said  that  the  workers  of 
New  Zealand  had  got  the  bone  while  the  capitalists  had 
got  the  meat.     Mr.  McLaughlin  said  that  the  workers 
would  make  a  mistake  in  cutting  themselves  adrift  from 
the  Liberal  Party,  through  whom  they  had  got  more 


304      STATE  SOCIALISM  IN  NEW  ZEALAND 

concessions  than  had  been  obtained  by  the  Independent 
Labour  Party  in  Austraha.  Several  other  delegates 
doubted  the  advisability  of  breaking  with  the  Liberal 
Party,  but  the  motion  was  carried  by  a  vote  of  22  to  2. 
(Report  of  the  Annual  Conference  of  the  Trades  and 
Labour  Councils,  1909.) 

The  labour  leaders  are  probably  ill-advised  in  their 
effort  to  establish  an  Independent  Labour  Party  at  the 
present  time,  notwithstanding  the  victory  of  the  Aus- 
tralian Labour  Party  in  the  elections  of  1910.  The  ur- 
ban population  of  New  Zealand  is  not  so  great  as  that 
of  Australia,  and  the  number  of  people  owning  property 
is  so  large  as  to  offer  an  insuperable  barrier  against 
either  single-tax  or  revolutionary  socialism.  Besides,  an 
Independent  Labour  Party  could  not  do  much  more 
for  labour  than  has  been  done  by  the  Liberal  Government 
without  driving  capital  away  and  ruining  the  industries 
of  the  country.  Again,  the  formation  of  an  Independent 
Labour  Party  would  probably  force  the  Liberals  into  an 
alliance  with  the  Opposition,  and  prevent  further  im- 
portant concessions  to  labour  for  years  to  come. 

The  Liberal  Party  is  not  a  socialist  party,  although 
it  has  gone  rather  far  in  the  direction  of  state  socialism 
in  its  efforts  to  conciliate  the  working 
Troubles  of  the  class,  through  whose  support  it  has 
Liberal  Party  remained  in  power  for  almost  twenty 
years.  The  Premier  is  a  financier  and 
business  man  of  great  ability,  who  seems  to  think  that 
there  has  been  enough  radical  legislation  for  the  present, 
and  all  that  he  offers  to  the  working  class  is  a  voluntary 
system  of  national  annuities,  and  other  contributory 
insurance  schemes,  which  will  not  satisfy  the  more  radi- 
cal among  the  labour  leaders.  There  is  trouble,  too,  with 
the  small  farmers,  hitherto  the  backbone  of  the  Liberal 


SURVEY  AND  ESTIMATE  OF  RESULTS     305 

Party,  who  have  been  converted  to  capitaUsm  by  the 
sociaHstic  legislation  passed  for  their  benefit.  The 
farmers  ask  for  the  freehold  and  the  labourites  demand 
the  nationalization  of  land,  while  the  Government  tries 
to  postpone  the  settlement  of  both  questions  as  long  as 
possible,  knowing  that  they  threaten  to  disrupt  the 
Liberal  Party. 

It  is  probable  that  some  sort  of  fusion  will  be  effected 
sooner  or  later  between  the  Opposition  and  the  more 
conservative  elements  in  the  Liberal 
Party;  and  that  the  more  radical  Lib-  The  Political 
erals  will  join  an  independent  Labour  Outlook 
Party  in  demanding  the  nationalization 
of  land,  and  other  measures  looking  toward  socialism  as 
the  goal,  more  or  less  remote.  But  the  party  of  the  prop- 
erty owners  will  have  a  large  majority  at  first;  and  even 
when  New  Zealand  becomes  an  industrial  country,  with 
great  manufacturing  industries  and  a  large  urban  popu- 
lation, it  should  be  possible  for  the  party  of  property  to 
attach  to  itself  the  more  efficient  among  the  working 
class,  by  giving  them  high  wages,  short  hours,  pleasant 
conditions  of  labour,  opportunities  for  promotion,  a 
chance  to  acquire  property,  insurance  benefits,  and 
greater  advantages  of  every  kind  than  they  could  gain 
under  any  form  of  socialism.  If  this  can  be  done,  the 
socialists  will  be  in  a  hopeless  minority,  a  proletariat  of 
the  inefficient,  for  whose  improvement  everything  will  be 
done  that  can  be  done,  but  for  whom  the  community 
could  not  sacrifice  itself  without  peril  of  decay  and  ruin 
in  the  struggle  for  racial  supremacy  now  impending. 

The  most  momentous  question  of  the  day  in  New 
Zealand,  as  in  Australia,  is  not  the  land  question,  nor  the 
labour  question,  but  the  question  of  Asiatic  immi- 
gration.    Even  the  socialists,  with  all  their  internation- 


306      STATE  SOCIALISM  IN  NEW  ZEALAND 

alism,  demand  the  exclusion  of  coolie  labour,  because 
they  realize  that  unrestricted  immigration  might  bring 

down    the    standard    of    living    to    the 

e    en  o  Asiatic    level    and    overwhelm   colonial 

Immigration        civilization  with  a  Mongolian   invasion. 

The  danger  may  appear  slight  and 
remote  to  people  dwelling  in  security  in  the  interior  of 
the  American  continent,  or  on  the  Atlantic  coast;  but 
it  looks  dark  and  threatening  to  the  inhabitants  of 
New  Zealand,  Australia,  California,  and  all  the  European 
communities  on  the  Pacific  Ocean.  What  the  British 
Colonies  need  most  is  not  more  socialistic  legislation, 
but  an  alliance  with  the  United  States;  and  who  shall 
say  that  the  United  States  does  not  need  an  alliance 
with  the  British  Empire,  if  not  for  the  open  door  in 
China  and  the  mastery  of  the  Pacific,  at  least  for 
the  preservation  of  Anglo-Saxon  civilization? 


INDEX 


Accounting,  importance  of,  70,  106,  107, 

116,  215. 
Advances  to  Settlers,  16,  113,  285. 
Advances  to  Workers,  15,  285- 
Alison,  E.  W.,  iso,  212. 
Allen,  James,  105,219. 
Aiistey,  Hon.  John,  193. 
Arbitration,  industrial,  216-268. 

Arbitration   Court,  the,  222,  223, 
227,  228,  230,  251,  252,  254.  263, 
26s,  267,  268. 
Awards,   223,  228,  230,  231,  241, 

242. 
Awards,  enforcement  of,  238,  252- 

260,  262. 
Awards  refused,  230,  231. 
Breach   of  award,  223,   224,   232, 

233,  237. 
Compilation  Act,  1905,  220-225. 
Conciliation,    221,   222,    227,   228, 

229,  25s,  260,  262,  263. 
Cost  of  production,  234,  243,  244, 

247. 
Disputes,  222,  226. 
Dissatisfaction,  250-260. 
Efficiency  of  labour,  233,  234,  23s, 


Fair  wages,  234,  238,  239,  240,  243. 

Fines,  223,  224,  252-262. 

Incompetent  worker,  the,  232. 

Minimum  wages,  232-234. 

Preference    to    unionists,   235-237. 

Registration,  221,  225,  227. 

Registration,  cancellation  of,  221, 
251,  261,  264,  266,  267. 

State  regulation  of  v/ages,  226,  229. 

Strikes  and  lockouts,  224,  232,  243, 
249,  250-261,  264-266. 
Argentina,  12. 
Aristotle,  19. 
Asiatics,  115,  187,  239,  281,  282,  305, 

306. 
Atkinson,  A.  R.,  184. 

307 


Atkinson,  Sir  Harry,  98,  123,  190,  209. 
Australia,  7.  12,  14.  I5.  56,  91.  IS2,  207, 

212,  269,  273,  277,  280,  281,  301,  304. 
Australian  Mutual  Provident  Society, 

157-163. 
.Aves,  Ernest,  226,  228,  229,  230,  231, 

233.  239.  245,  248. 


B 


Ballance,  Hon.  John,  12,  15,  23,  28,  39. 

99,  122,  125,  218,  277,  280. 
Barclay,  A.  R.,  211. 
Baume,  F.  E.,  135.  202. 
Bell,  Dr.  Mackintosh,  177. 
Booth,  G.  T.,  248. 
Broadhead,  Henry,  218,  220,  226,  228, 

230,  233.  23s.  240,  244,  249,  250,  261. 
Brydone,  Thomas,  10. 
Buckle,  Henry  Thomas,  i. 


Canada,  2,  3,  4,  12,  34,  35,  88,  94.  263, 

269,  270. 
Capital,  private,  3.  49.  SO,  56,  102,  13s, 

178,  245,  265,  287,  289,  305. 
Centralization,  7,  207,  296,  297. 
Challaye,  M.  Felicien,  250. 
Chapman,  Justice  H-  S.,  230,  252. 
Charitable  aid,  179-183.  187,  188,  193, 

194- 
Cheviot  Estate.  41,  129. 
Clark,  Dr.  Victor.  2,  87,  233,  242,  244, 

247.  273,  277,  288. 
Class  legislation,  4,  5,  32,  35,  295.  303. 

304. 
Climate,  34,  52,  295- 
Coal  mines.  State,  15.  286. 
Colorado,  269-277. 
Competition,    158,   165,    169,    171-178. 

214,  287,  288. 
Constitution  Act,  4,  117. 
Consolidated  Fund,  96,  104,  113,  ii7. 

118. 


3o8 


INDEX 


Cooper,  Justice  T.,  230,  232. 

Cost  of  living,  243,  244,  269-283. 

Coghlan,  T.  A.,  277. 

Credit,  State,  6,  21,  loi,  102,  113,  114, 

289,  290. 
Crises,  industrial,  7,  9,  12,  18,  59,  60, 

98,  112,  116,  216,  290. 
Crombie,  C.  B.,  133. 
Crown  lands,  3,  20-33. 


Dairy  produce,  10,  ir, 

Dalston,  H.  M.,  63. 

Death  duties,  134,  135. 

Death  rate,  153. 

Debt,  public,  6,  21,  42,  43,  57,  94-116, 

294. 
Denver,  wages  and  prices  in,  270-277. 
Development,  35,  82,  85,  96,  108,  298. 
Discontent,  8,  9,  17,  302,  303. 
Dreadnought,  gift  of,  115,  282. 
Duthie,  John,  219. 


Education,  6. 

Edwards,  Justice  W.  B.,  230. 

Ell,  H.  G.,  29,  141,  151,  244,  248. 

Emigration,  9. 

Employers'  liability,  15. 

Enterprise,  State  and  private,  3,  4,  54, 

60-63,  154.  IS7.  158,  160,  165,  166, 

169,  167-178,  214,  21S.  286,  287,  288, 

295- 
Expenditure,  public,  58,  68,  71-80,  83, 

84,  91,  92, 107, 109,  III,  112, 115,  134, 

136,  188,  189,  209,  214. 
Exports,  II,  99,  120,  290. 


Factories  Act,  is,  216. 
Farmers  in  politics,  12,  16,  26,  27,  28, 
32,  37  ,  38,  44.  51.  124,  I2S,  130,  133, 
151,  248,  298,305. 
Fergus,  Hon.  T.,  219. 
Fire  Insurance,  State,  167-178. 

Premiums,  171,  174,  178. 

Reserves,  173,  175. 

Expenses,  173. 

Profit  and  loss,  173,  174,  i75,  28 


Findlay,  Hon.  J.  G.,  18,  46,  131,  193, 

194.  233.  234,  242,  247,  268. 
Fisher,  Hon.  Andrew,  is,  105. 
Fisher,  H.  S.,  2S. 
Fitzroy,  Governor  Robert,  122. 
Fovvlds,  Hon.  George,  29,  isi.  174. 
Fox,  Hon.  William,  6. 
Fraser,  William,  102. 


General  Assembly,  powers  of,  4,  s.  ii7. 
George,  Henry,  29,  51,  122,  12s,  133. 

139,  140,  151. 
Gladstone,  Right  Hon.  W.  E.,  154. 
Government  stroke,  81,  288. 
Grey,  Sir  George,  38,  61,  88,  122,  218. 

H 

Hall,  Sir  John,  219. 
Hall-Jones,  Hon.  W.,  99,  no. 
Hally,  P.,  260. 
Harkness,  J.  G.,  219. 
Hector,  Sir  James,  58,  59. 
Herdman,  A.  L.,  135,  206,  207. 
Heyes,  P.,  144. 
Hickson,  C.  A.,  299. 
Hutcheson,  J.,  191. 
Hobbs,  F.  W.-,  264. 


I 


Immigration,  6-9,  38,  S8,  181,  270,  280- 

283,  302,  30s,  306. 
Imports,  120,  290. 
Inflation,  7,  S9.  98,  112,  131. 
Interest,  rates  of,  285. 


Knights  of  Labour,  14. 
Knowles,  John,  56,  57,  68. 


Labour,  co-operative,  72. 

Labour  in  poHtics,  8,  13,  14,  iS,  27,  Si, 
IS2,  211,  217,236,  237,  250,  257,  259, 
265,  267,  282,  298,  303,  304,  305. 

Labour  legislation,  15,  294. 


INDEX 


309 


Laissez-faire  theory,  i,  17,  18,  38. 
Land  question,  the,  12,  16,  20-51,  293. 
Absentee  ownership,  47,  51,  128, 

129. 
Closer  settlement,  16,  38-49.  293' 
Freehold  tenure,  23,  33,  305. 
Large  holders,  s.  9.  12,  13,  3S-51. 

125,  128,  129. 
Leasing  of  Crown  Ijinds,  20-33,  57. 
Limitation  of  areas,  so. 
Small  holders,  11,  12,  13,  16,  36, 

37.  I2S. 
Speculation,  44,  59,  loi,  131,  139. 
Taxation,  117-152. 
Unimproved  values,  122,  125,  126, 

129,  138-152. 
Valuation,  16,  22,  23,  27-30,  40, 
129-132,  139. 
Liberal  Party,  12-15,  99.  103,  217,  241, 

267,  290,  293.  296,  302,  303,  304. 
Life  Insurance,  State,  153-166. 
Premiums,  158. 
Expense  ratio,  159-161. 
Bonuses,  161,  162. 
Lapses,  162,  163. 
Investments,  164. 
New  business,  158,  165. 
Lloyd,  Henry  D.,  250. 
Lloyd-George,  Hon.  David,  32,  191. 

M 

Macdonald,  Hon.  J.  Ramsay,  225. 
MacGregor,  Dr.  Duncan,  180,  181. 
MacGregor,  John,  223,  224,  226,  229, 

233.  250. 
Machiavelli,  226. 

Manavvatu  Railway,  60-62,  91,  no. 
Manchester  School,  i. 
Mander,  Francis,  29. 
Mann,  Tom,  265. 

Manufactures,  growth  of,  245,  246. 
Maoris,  55,  96,  98,  119,  291. 
Maritime  Strike,  14,  216,  217. 
Martin,  Justice  J.  C,  230. 
Maskell,  VV.  H.,  53. 
Massey,  W.  F.,  102,  106,  248. 
McCarthy,  S.  E.,  258. 
McCulIough,  J.  A.,  210-214,  231. 
Mcllraith,  J.  W.,  243. 
McKermie,  Sir  John,  15,  24,  26,  39. 


McKenzic,  Hon.  Roderick,  259. 

McLaren,  D.,  251. 

McNab,  Hon.  Robert,  45. 

Menger,  Carl,  50. 

Midland  Railway,  62,  63. 

Millar,  Hon.  J.  A.,  75,  76,  92,  197,  201, 

217.  237.  24s,  256,  263,  264. 
Mutton,  frozen,  10,  11,  12,99,  290. 

N 

National  endowments,  22,  31. 
Neill,  Mrs.  Grace,  181. 
Newcastle  strike,  15. 
New  Zealand  Company,  2,  7,  52. 

O 

O' Byrne,  T.,  303. 
Okey,  H.  G.  H.,  212. 
Opportunist  legislation,  17. 
O'Regan,  P.  J.,  140,  141. 


Parsons,  Professor  Frank,  91,  168. 
Paternalism,  18. 
Paul,  Hon.  J.  T.,  266. 
Pensions,  old-age,  179-196. 
Perpetual  lease,  22,  23,  26,  30. 
Perpetuity,  lease  in,  24,  25,  26,  30. 
Pilcher,  E.  G.,  55.  57.  59. 
Politics  in  relation  to  State  enterprise, 

58,  74.  78,  83,  85,  87,  91,  108,  109, 

no,  257,  259. 
Population,  11.  216,  24s,  290. 
Post  Office,  284. 
Postal  Savings  Bank,  5,  284. 
Poverty,  179-183,  299,  302. 
Preferential  tariff,  120. 
Profits  of   private  business,   246,   247, 

263. 
Profits  of  State  enterprise,  43,  58,  60, 

68,  103,  116,  136,  259,  287,  289. 
Productive  investments,  95,  96,  1 16. 
Protective  tariff,  120,  I2X,  244. 
Provinces,  the,  2,  3,  4,  5,  7,  21,  53,  54. 
Public  Service,  197-215,  296,  297. 
Appointment,  198.  199,  200. 
Classification,  200-204. 


3IO 


INDEX 


Public  Service: 

Efficiency,  80,  81,  203.  204,  205, 
214,  215,  288. 

Retrenchment,  114.  136,  208,   209. 

Patronage,  199-203,  206. 

Politics,  210-214. 

Promotion,  202-206,  208. 

Tenure  of  office,  205,  207. 
Public  Trustee,  6. 
Public  Works  Fund,  104-110. 
Public  works  policy  of  Vogel,  6,  21,  55- 

59- 

R 

Railways,  3,  6,  9.  54-93. 
Accommodation,  64. 
Addington  workshops,  81. 
Additions  to  open  lines,  70,  71.  76. 
Commissioners,  68,  69.  73,  80,  90, 

91,  206. 
Cost,  71.  72,  80,  86. 
Deficits,  71-76,  82,  84,  85. 
Fares  and  freight  charges,  65,  66, 

67. 
Finance,  68-93. 
Gauge,  56,  64. 
Mileage,  63. 

Political  railways,  58, 69,  84-87,  9i. 
Private  railways,  60-63. 
Provincial  railways,  54,  55,  s6. 
Railway  servants,  pay  of,  77.  78. 
Rating  on  unimproved  values,  139-152. 
Reeves,  Hon.  W.  Pember.  3.  8,  13.  I5, 
21,  38,  52,  57.  59,  123,  124,  125,  127, 
171, 190,  217,218,  219,  220,  ae4,  226, 
227,  228,  23s,  24s,  252,  263. 
Refrigeration,  10,  11,  12,  99,  293- 
Renewable  lease,  30,  32,  44- 
Revolution,  political,  7.  12,  I4,  35.  99- 
Roads,  3,6,  37,  52,  53,  54- 
Rolleston,  Hon.  William,  5.  22,  24,  26, 

28,  38. 
Ronayne,  T.,  81. 
Ruskin,  John,  196. 
Russel,  Lord  John,  122. 
Rusbridge,  H.,  282. 
Rutherford,  A.  W.,  201. 
Ryan,  Professor  John  A.,  234- 


Scholefield,  Guy  H.,  8,   9,    10,    14,    i7. 
244,  286,  293.  294- 


Scott,  Professor  R.  J.,  81. 
Scott,  William,  248. 
Seddon,  Right  Hon.  R.  J.,  28,  69,  98. 
99,  108,  109,  120,  172,  182,  185.  190. 
191,  277,  296. 
Segar,  Professor  H.  W.,  IS3,  I95. 
Single-tax,  27,  12s,  I39.  140,  141.  142. 

143,  ISI.  278,  303. 
Sinking  fund,  102,  103,  116,  288. 
Sim,  Judge  W.  A.,  230,  252. 
Socialistic  tendencies,  19.  49,  5i.  302, 

303,304,  305- 
Social  utility  of  State  enterprises,  83, 

84,  108,  288,  289. 
Spahr,  Dr.  C.  B.,  299.  300. 
State  Accident  Insurance,  16. 
State  activities,  origin  of,  1-19.  296. 
State  coal  mines,  16,  286. 
State  Fire  Insurance,  16,  167-178. 
State  Life  Insurance,  5,  153-166. 
State  telegraphs,  S- 
State  telephones,  5. 
State  Tourist  Department,  16. 
State  trading,  16,  136,  214,  294,  298. 
Stephens,  A.  G.,  89. 
Stephenson,  Robert,  56. 
Stevens,  Hon.  E.  C.  J.,  39- 
Stewart,  Hon.  W.  Downie,  217,  219. 
Stockwell,  H.  G.,  70. 
Stout,  Hon.  Sir  Robert,   22,   98,    146' 

194,  198,  229. 
Strikes,  217,  218,  224,  250-268. 
Surplus,  the,  lOS,  106. 
Sweating,  14,  216,  23S,  239,  243,  264. 


Taxation,  117-1S2. 

Death  duties,  134,  I3S- 

Evasion  of  taxes,  45.  46,  132. 

Graduated  land  tax,  45-49,    128- 
132. 

General  property  tax,  123. 

Local  taxation,  138-152. 

Land  and   Income  Tax,  46,   121- 
137. 

Tariff,  the,  121. 

Taxation  of  mortgages,  126,  127, 
128,  132. 

Ordinary  land  tax,  126. 
I  Per  capita  taxation,  119,  120. 

!  Stamp  taxes,  i34- 


INDEX 


3" 


Taylor,  T.  E..  186. 

Templin,  W.  F.,  271. 

Thomson,  J.  C,  107. 

Tregear,  Edward,  255,  277.  278,  280. 

Truck  act,  iS- 

U 

Unearned  increment,  24,  26,  43,  62,  83. 

United  States,  2,  4,  12,  34.  35.  52,  64, 
6s,  88,  94,  no,  117,  119,  120,  173, 
187,  203,  204,  269,  273,  274,  275,  276, 
277,  283,  292,  299,  301,  306. 

University,  New  Zealand,  6. 

V 

Village  settlements,  5. 
Vaile,  Samuel,  88-91,  142. 
Valentine,  Dr.  T.  H.  A.,  182. 
Vogel,  Sir  Julius,  5,  6,  8,  9,  SS.  56,  58, 

83.  97.  113.  154.  155.  208,  298. 
Von  Dadelszen,  E.  J.,  243,  278. 


VV 

Wages,  77.  243.  244,  247,  269-283.  302. 
Wakefield,  Edward  Gibbon,  7,  21,  36, 

52. 
Ward,  Right  Hon.  Sir  Joseph  George, 

44.  75,  77.  79.  87,  99.  103,  109,  113, 

1 14,  13s,  173.  186,  194,  203,  205,  206, 

209,  212,  286,  287,  288,  298. 
Warren,  Senator  F.  E.,  in. 
Wealth,   distribution  of,   19,   292,  299, 

300,  301,  302. 
Wealth,  private,  97,  114,  291,  292,  299, 

301. 
Wellington,  wages  and  prices  in,  270- 

277. 
Williams,  Justice  J.  S.,  230,  241. 
Woodward,  J.,  156. 
Wool,  10,  II,  12,  34,  290,  293. 
Workers'  Dwellings,  15,  285. 


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